Recovery slow in coming
The Great Recession is dragging its feet on America”™s doorstep and not going away any time soon.
Bruce McCain, chief investment strategist for Key Private Bank, was in the Hudson Valley last week to flesh out the country”™s financial condition in the meltdown”™s aftermath.
Speaking to members of the Rockland Business Association at Nyack Seaport on Oct. 13 and again to investors at a meeting at the Westchester Country Club in Rye on Oct. 14, McCain said the recession of 2008 may be officially declared over, but in reality, the U.S. is making a snails”™ pace comeback.
“It”™s been an obvious tough time…. Very different circumstances led us to the collapse we saw two years ago,” said McCain. “This time, we”™re facing a very different world, with rising competition for sales and resources from overseas.”
McCain says slow growth is better than no growth and does not expect to see the country going into a double-dip recession “unless something drastic happens.”
Consumer spending is dramatically lower than in the past, but still moving forward, said McCain. Consumers constitute 70 percent of the U.S. spending. And, although consumers are economically stressed, signs of income growth lead him to believe spending will continue, albeit cautiously.
Small businesses particularly effected
McCain noted it”™s been an extremely difficult time for small businesses. “Although (they have) been reluctant to spend on inventory or capital, many are having to decide whether to expand or give up sales ”“ and expansion is starting to work its way through.”
That spending is contributing to 2.1 percent of overall GDP growth and keeping the economy in forward motion, said McCain, with exports a significant source of strength in the second quarter of 2010.
China, the third largest export market behind Canada and Mexico, will lend itself to a better environment for exports going forward since the dollar has declined in value. But why didn”™t the U.S. do better? McCain said the rise of imports offset the U.S. recovery.
Government spending a major contributor
One problem not so easy to rein in is government spending, which has not been a net contributor to the GDP as it has in the past, said McCain. “Many state and local governments are in a crisis, cutting back to make their budgets work, and the crises are certainly not over…. Government spending is beginning to come to a head and numbers suggest it will not improve any time soon.”
Europe is suffering from the same budgetary overspending problem. McCain said a large portion of the world will see sluggish growth for an extended period of time: “Perhaps as long as 10 years, before we see the good times.” Real estate may also take as long to recover, said Key Private Bank”™s chief economist.
He also told business owners that if they have the cushion to make some risky investments, there”™s no time like the present. “The absolute best time to buy is when everyone else is panicked. Watch for the opportunities and get beyond your own nervousness and reluctance.”
For the public inundated with news and pleas for election or re-election in Nov. 2 election, “the closer we get to it and get past it, the better,” said McCain, “We will deal with whatever we end up with ”“ whether good, bad or ugly ”“ and we can start getting back to business.”