Following a year of slow economic growth, tiring consumers and
industries that are already reaching their maximum potential,
business analysts have predicted a sluggish short-term future for
the national economy, which they believe is still feeling the
impact of the 2001 recession.
“For the most part, the economy is doing alright right
now,” said Michael Bazdarich, a senior economist at the
Anderson Forecast at UCLA’s Anderson School of Management.
The Anderson Forecast provides a projection of the condition of the
economies in California and the United States, and is published
several times a year.
“The economy is definitely not in horrible shape, but at
the same time, it is also not growing as fast we would like. And
even if we continue with these rates, we can definitely see some
storm clouds on the horizon,” Bazdarich said.
According to the Forecast, the economy is still in an
“expansion” phase following the recession in 2001.
Bazdarich said in order to prevent consumer markets and the
housing industry from slipping during the recession, the Federal
Reserve front-loaded the expansion to stimulate growth.
While the Federal Reserve succeeded in softening the impact of
the recession, subsequent growth has slowed down as a result of the
initial spurt.
“We find that consumers have been slowing down,”
Bazdarich said.
During the past year, growth has not been as rapid as the
government and Wall Street had expected.
Wall Street expected a growth of 4.5 percent in the gross
domestic product last year, yet the first-quarter results indicated
a growth of only 3.1 percent, Bazdarich said.
The results were later raised to 3.5 percent, but remain
substantially lower than desired. Analysts at the Anderson Forecast
expect the second-quarter rates to fall even lower.
“We don’t see any short-term upward
potential,” Bazdarich said. “And there is a concern
about what (sector) is going to drive growth in the near
future.”
Bazdarich said consumer and housing sectors were not hit hard by
the 2001 recession, but are close to reaching their maximum
potential at present.
“These sectors fared very well in 2002 and 2003, but they
have been leveling off right now,” he said.
Capital markets ““ which include share trading and money
markets ““ and business spending also took a hit in 2001, but
have been improving slightly since, albeit not very
significantly.
Bazdarich said exports can be expected to be among the most
profitable in the near future.
“If anything is going to drive strong growth it would be
the export sector,” he said.
The export sector has not seen much growth over the past four
years, Bazarich said, and might have some potential for growth in
the future. But intense competition in the global trading scene and
the mediocre performance of the European markets might impact this
sector, he added.
According to a US Department of Commerce press release, exports
this year in April were $3.1 billion more than those in March.
The Forecast anticipates business services to fare better than
consumer services, especially in California, where companies that
are tied to foreign trade can expect to be profitable.
The Forecast predicts there will be strong growth in the import
sector, which bodes well for local companies, as a significant
share of national imports pass through the ports of Long Beach and
Los Angeles.
The Forecast also expects the housing sector in Southern
California to be one of the year’s better performers, given
its recent results.
Bazdarich said the economy needs more help from the consumer and
housing sectors in order to create more growth, and he expects the
economy to be sluggish in the short term.
While the economy performed a lot worse than what many companies
expected last year, Bazdarich said there are enough reasons to
remain cheerful, as there is still some potential for growth.
“We have been some of the least optimistic forecasters,
and in retrospect the economy has done a little better than we
thought ““ but only a little,” Bazdarich said.