Confused about the economic forecast? Yeah, so are the forecasters

One day it's all doom and gloom, and the next seems to forecast the worst may be over. Only to be followed by more "oh no, the sky is falling" news. Confused? Yup. Who isn't. Since the news of late seems to feel a bit schizophrenic, we thought we'd take a quick look at recent forecasts and reports so we can see in one place what the gurus are saying and seeing.
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One day it's all doom and gloom, and the next seems to forecast the worst may be over. Only to be followed by more "oh no, the sky is falling" news.

Confused? Yup. Who isn't. Since the news of late seems to feel a bit schizophrenic, we thought we'd take a quick look at recent forecasts and reports so we can see in one place what the gurus are saying and seeing.

SNEWS® knows the current economic state is important for your business. This is one look at different ways it's affecting our industries and your business in a periodic and ongoing series of stories in SNEWS. This time around we take a look at forecasts about the future of the economy, sizing up statistics and surveys from research groups. Stay tuned for more in-depth reporting on the current situation as it develops and changes, from interviews with experts, closer looks at small businesses and how they are coping, to economic statistics, breaking news and how it affects consumers.



Usually April is all about the 15th, the day taxes are due for most Americans but this year that seemed to blow right past us. Instead, on April 15, more reports about the economy took the headlines, especially the monthly release from the Federal Reserve Board summarizing the state of the economy overall and in 12 U.S. districts.

Overall, the report noted a continued downturn with the forecast for more bad news in manufacturing, employment and commercial real estate in particular. Look between the lines, however, and you'll find even the Feds reported that five of the 12 districts were seeing some kind of moderation in the pace of the decline or, even better, actually a stabilization.

Geographically disparate

On the bad news front, the districts of Boston, Philadelphia, Cleveland, Richmond, Atlanta, St. Louis, and Minneapolis were still slowing in economic activity that covers retail, manufacturing, business services, commercial and residential real estate.

But others saw a glimmer of light: New York was moving at a "subdued pace;" Chicago was declining more slowly; Kansas City showed "tentative signs of stabilization;" Dallas demonstrated "signs of stabilization at low levels;" and San Francisco had a "slower rate of decline in some sectors." (To see a large map of the districts similar to the one to the right, click here; to see the full report from the Federal Reserve, click here.)

FedReserveDistricts.jpg

In addition, that and the mixed bag of reports offered on the same day by the Treasury Department in its monthly survey of lending by the 21 biggest recipients of bank bailout money caused Wall Street to nearly party in the streets. On April 15, the Dow Jones Industrial Average closed up at 8029.62, and on April 17 continued the trend, closing at 8131.33; the S&P 500 closed up at 852.06 and on April 17 logged another small jump to 869.60; and the Nasdaq closed up at 1626.80, also ticking upward at the close of the week to 1673.07.

But wait, not so fast… In the same mid-month flood of reports, we saw unemployment go up, consumer prices dropping another 0.1 percent, unexpected drops in retail sales (Click here to see that April 15, 2009, SNEWS News Release), import levels hitting their lowest level in seven years (Click here to see that April 15, 2009, SNEWS News Release) and home prices and construction still declining. Those add to evidence we are still locked tightly in a recession.

Business leaders don't agree

So how positive are people? A week earlier the Conference Board, which regularly measures "CEO Confidence," noted the top bosses in the country were still dragging their chins. Indeed, the level of confidence was up to 30 from a lowly 24 last quarter (a reading of more than 50 means more positive than negative results), but that's still a long way from being in the black when it comes to confidence.

But despite lagging confidence, more of the CEOs surveyed, when asked to look six months ahead, were reporting they expected improved business conditions: 7 percent said they expected things to get better compared to only 11 percent last quarter; and when asked about expected improvements in their own sectors, 26 percent said things would look up in six months, which is way up from only 12 percent last quarter. Of course, this was the same bunch that in February 2008 reported that a recession was unlikely.

In another recent survey of business leaders released on April 7, the Business Roundtable index -- which tracks the outlook of CEOs of some of the country's biggest companies -- dropped to its lowest level since the survey began in 2002. This group was basically glum, glum about today, glum about yesterday, and glum about tomorrow, noting they expected their companies' sales and spending to drop in the next six months.

A month earlier in early March, advisors polled for Charles Schwab's Independent Advisor Outlook Study were split on whether the economy would pick up by year's end or not. Just over half (53 percent) who were polled in late January said they thought the S&P 500 would rise in the next six months. (We'll have to wait and see if the rise this week is going to stick.) When asked in January to predict how long the recession would last, 44 percent said they estimated it would be wrapping up by December 2009, while 41 percent gave it another year -- to December 2010.

In a February 2009 statement, the government said the economic contraction for the fourth quarter of 2008, which had been estimated at 3.8 percent, was actually 6.2 percent. That was the economy's worse showing in a quarter-century. But others have along the way warned the public as well as the economists to not freak out since a recession is a lot different than a depression. Speaking in January, economist Chris Thornberg, reportedly one of the first to predict the recession, said Americans are wont to overreact and although he has been known to predict doom and gloom, he said this has gotten out of hand.

"Whoa, time out…deep, deep breath," he told a group of appraisers gathered in the Sacramento, Calif., area, as reported in the Sacramento Bee. "We're in the midst of what I would call a nasty recession. Like a bad cold, you'll get over it."

At that time, he said he expected this recession to end up like the last large downturn in the early 1980s, which drove national unemployment to 10.8 percent. When he spoke in January, the rate was 7.2 percent. The Bureau of Labor Statistics just reported this week unemployment as of March 2009 had risen to 8.5 percent -- the highest level in more than a quarter of a century but still off the 1980s figure.

Consumers more depressed

But what about consumers? BIGresearch reported in January that consumers weren't so glum as they had been: Nearly a quarter (24.7 percent) reported they were confident or very confident in the chances for a strong economy reappearing, rising from the one in five rating (20 percent) at the end of 2008. January's 24.7 percent figure was the highest reading since September 2008 when it was 28.3 percent.

BIGresearchJan09.jpg

Times change, though, and sometimes quickly. Only two months later, in its March report, BIG found the confidence in chances for a strong economy had again plummeted -- to 19.5 percent, down more than five points from a year ago and trailing a reading from two years ago by more than half (down from 46.9 percent).

No, the worst isn't over although hints of some dim light are there. Yes, forecasters don't agree. And the statistics and forecasts are at best unpredictable. Wish SNEWS had a crystal ball.

--Therese Iknoian

SNEWS is looking at different ways the economy is affecting our industries and your business in a periodic and ongoing series of stories. Stay tuned for more in-depth reporting on the current situation. Email us at snewsbox@snewsnet.com with any tips, comments or ideas on stories you'd like to see.

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