No “V” expected in this recovery

conomists may be eating humble pie after watching the economy hit many unexpected bumps over the past nine months. But that doesn’t mean they’ve stopped making predictions.

During a presentation at the International Marina & Boatyard Convention in late January, Tony Villamil, dean of St. Thomas University of Florida’s School of Business, joked about the challenges economists face in predicting the future during such a fluid time for the U.S. economy.

But he also shared a forecast for economic recovery. Villamil suggested the first half of the year would be “very tough.” Housing starts were down about 20 percent in Dec. 2008, compared to Dec. 2007. They will likely begin to stabilize in 2009, he predicted. In addition, the unemployment rate will continue to increase, likely reaching 8 to 9 percent before all is said and done, according to Villamil.

But with energy prices down and the political noise of the election quieting, he expects a recovery to begin in late 2009 or early 2010.
That recovery has a greater probability of looking like a “U” than an “L” or a “V,” according to Villamil. In other words, while the bottoming out is unlikely to drag on for months, the rebound will probably be gradual, not immediate. And it may be followed by inflation in 2011 or 2012, so he recommended businesses lock in interest rates now.

As one would expect, it will likely take the boating industry some time before it starts to feel the benefit of such a recovery. As Villamil said, “Consumer balance sheets need to be repaired before discretionary spending returns to trend growth.”

Leave a Reply

Your email address will not be published. Required fields are marked *