WCA March 2010

Statue of Liberty Image from BigStockPhoto.com Photographer: Marty

of zero interest rates will come to an end just after mid- year in Canada and soon after that in the United States.

The economy

Borrowing costs are seen as remaining exceptionally low as central banks bide their time before hiking aggressively. The Bank of Montreal also predicts that inflation will remain subdued, averaging 1.5% in Canada and about 2% in the United States.

A cheering projection: Ramped-up production propels the expansion early in 2010, and employment picks up in the second half of the year The Bloomberg News survey of economists enjoys a reputation for accuracy. And Dean Maki – the chief US economist at Barclays Capital Inc in New York – is the most accurate forecaster among the 58 experts who responded to the latest survey, in December. Taken together, Bloomberg and Mr Maki provide some encouragement for even the confirmed pessimist. Calling his shots, Mr Maki offered these projections: Rising incomes and the rebound in stocks will prompt ❖ Americans to do what they do best – consume Rising demand and dwindling inventories will move ❖ companies out of survival mode into expansion mode The “kick to the economy” as production catches up to ❖ sales “is going to be extremely large” As spending picks up and companies increase ❖ investment and hiring, the US economy this year will turn in its best performance since 2004 The world’s largest economy will expand 3.5% in 2010 ❖ Mr Maki told Bloomberg reporters Timothy R Homan and Bob Willis that he sees US household spending getting up steam as the country moves into the second half of 2010. “The overall picture will be an economy growing rapidly enough to bring down the unemployment rate to an average of 9.6%,” he said – reaching about 9% by the end of the year. (“US Economy to Surge Says Most Accurate Forecaster,” 28 th December) Firmly rejecting the notion that the current business cycle is unique, Mr Maki, who holds his doctorate in economics from Stanford University in California, believes that conditions for a rebound are entirely consistent with those in past recoveries from recession. The former Federal Reserve researcher said, “The consensus view that growth will stay subdued all through the year – there’s no parallel to that in modern US history.” The analyst who preceded Mr Maki as Bloomberg’s ❖ No 1 forecaster is Jan Hatzius, chief US economist at Goldman Sachs Group Inc, also in New York. It is gratifying to report that Mr Hatzius, too, is optimistic, if more guardedly. He estimates that the US economy will expand 2.4% in 2010. His 2.5% first-quarter growth forecast is half the pace anticipated by Mr Maki. Similarly restrained, the Bank of Montreal expects Canada ❖ and the US to post GDP (gross domestic product) growth of 2.5% in 2010. Such growth would essentially reverse the declines of last year in both countries. As reported by the Toronto Star (23 rd December), Canada’s oldest bank and its fourth-largest by deposits believes that the era

‘Domestic migration’

Constrained by tight budgets, formerly mobile America stays put – and out of the sun “The economy trumps everything,” Dr Andrew A Beveridge, a New York-based demographer, told his hometown newspaper. The reference was to the influence of the credit crisis and ensuing Great Recession on the habits of Americans, who used to pull up stakes and move with casual ease – generally in the direction of sunnier climes. As reported by the New York Times, the last government figures to be released before the 2010 census gets under way disclosed sharp declines in population growth in the Sun Belt. States in the South and West developed rapidly during the real estate boom, but their attraction has waned along with people’s retirement nest-eggs. The data show that, as of July 2009, growth had slowed to a trickle in Arizona; while in Florida, Nevada, and California more Americans moved out than in. Citing an analysis by demographer and senior fellow William H Frey of the Brookings Institution, the Times’s Damien Cave noted that, in terms of total growth rate (arrivals from overseas included), Florida – “the Sunshine State” – now ranks 32 nd among the 50 states, down from third place in 2002. (“Recession Cuts Migration to Sun Belt,” 24 th December) Nevada, after leading the country from 2000 to 2004, has fallen to 17 th place in rate of growth overall and now ranks 38 th in domestic migration. Arizona dropped to eighth place in growth from No 1 three years ago. Dr Frey, who specialises in population redistribution and the demography of metropolitan areas, noted that the US domestic migration rate has reached its lowest point since World War II. Also according to the Brookings Institution, one of the oldest think tanks in Washington, many would-be migrants remain stranded in coastal states that used to be considered unaffordable. According to the nonprofit public-policy organisation, from 2004 to 2005 both California and

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Wire & Cable ASIA – March/April 2010