Forecasting firm sees new US recession in 2014

26 September 2012 19:28  [Source: ICIS news]

CAMBRIDGE, Maryland (ICIS)--The US economy will see continued if slow growth into next year but will turn down in the second half of 2013 and slide into a new recession in 2014, a forecasting firm said on Wednesday.

Brian Beaulieu, executive director at the Institute for Trend Research (ITR), told a specialty chemicals business conference that his firm expects the US economy to continue to grow modestly for the next two to four quarters.

He noted that US employment is improving, albeit slowly, and that consumer spending and other leading economic indicators are mostly showing improvement in recent months, although with some downturns.

“Banks are lending, retail sales are up, non-residential construction is improving,” Beaulieu said, adding: “And residential construction, which is 9% of the nation’s economy and was dead in the water a year ago, now is improving.”

He also noted that new construction by US chemicals producers is up by 50% from a year earlier.

However, because of some fundamental structural problems in the US economy – including the highest level of national debt since World War II – Beaulieu said ITR is forecasting that the slow upward momentum of growth likely will peak in mid-year 2013, then turn down in the second half of next year before falling into recession for full year 2014.

He said he expects US stock markets to peak in June 2013 before going into decline.

Beaulieu said the US economy will begin to recover in 2015 and beyond, but that another recession looms in 2018-2019.

“If you are 43 years old or younger now, life is going to get a bit more difficult in the future,” he told industry executives.  “If you’re over 43, then 2017 would be a good time to retire.”

He said there are three “mega-trends” that chemicals producers and other businesses should anticipate and prepare to meet.

“The first is demographics.  If you live and work in a country whose population is growing, you and your company win,” he said.  “If you’re doing business in a country, such as Japan, where population is declining, you lose.”

Second, he said, inflation will rise and later interest rates will climb sharply as the US Federal Reserve Board moves to confront the inflationary gain.  “Your business planning should anticipate this and model to meet it,” he said.

Third, he said, “Taxes are going to go up, and it doesn’t matter who is in the White House, Obama or Romney, taxes are going to go up.”

In addition, Beaulieu dismissed widespread worries among chemical producers and other businesses about the possibility of a second term for President Barack Obama.

“Here’s our take on the election,” he said, “We don’t care.”

Washington doesn’t drive your business, you do,” he said.  “Your business doesn’t depend on what government does – you have to find a way around it, you have to get more creative on how to make a buck.”

Beaulieu spoke on the first day of the two-day SOCMA Leadership Conference, which is sponsored by the Society of Chemical Manufacturers and Affiliates (SOCMA).

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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