Commercial Printing Outlook : Healing Light Cast on 2011December 2010 By Mark Smith
Expectations for economic growth were modest at best heading into 2010, and that's what the year has delivered. The only good news, really, has seemed to be that the worst hasn't happened. No double-dip recession. No collapse of the banking system.
With the dawning of 2011 on the horizon, the outlook had already turned brighter, even before the outcome of the November elections buoyed the spirits of the business community. "The bias of the U.S. economy is that it wants to grow," observes Ron Davis, Ph.D., and Printing Industries of America's (PIA) chief economist and vice president.
Then came the decision by Ben Bernanke, chairman of the U.S. Federal Reserve (the Fed), to purchase $600 billion worth of long-term Treasury securities to provide an economic stimulus. While it did elicit concerns about inflation and complaints from foreign governments, the move has largely garnered a wait-and-see response domestically.
Because of such unknowns, Davis frames his outlook in terms of The Good, The Bad and The Ugly scenarios. Heading into the fall, he was betting on The Bad—sluggish recovery, with a GDP growth rate of 2.7 percent in 2011 and 2.7 percent in 2012.
However, the outcome of the November elections and other factors now have PIA's economist somewhat more optimistic about the outlook for 2011 and 2012. Davis sees the most likely trajectory of the economy over the next two years bringing inflation-adjusted growth of 3.3 percent in 2011 and 3.5 percent in 2012. He puts the likelihood of that scenario at 50 percent vs. 30 percent for a continued sluggish recovery, and 20 percent for a double-dip recession (The Ugly).
Davis explains that the Republican gains were stronger than he thought they might be, which hopefully will lead to a more positive, settled political climate rather than "bickering over not very important things. That would erode confidence."
Haunted by Excess
Keeping tax rates at their current levels is factored into his now more optimistic "likely" scenario, but not any additional cuts. Davis would also like to see some moratoriums on new regulations and maybe the Environmental Protection Agency backing off enactment of cap-and-trade regulations on carbon emissions.
There's no question that the economy is healing, agrees Andrew Paparozzi, NAPL's chief economist and vice president. "Any indicator you look at—whether it is employment or GDP, consumer spending or industrial production—is noticeably and meaningfully stronger than it was a year ago. But it is a painfully slow and maddeningly inconsistent process because we created such severe excesses. There's simply no easy way to purge those excesses. It is happening, but it's going to take time."