The Conference Board Archives - Colorado-based Business and Economic Research

Conference Board Points to Slower Growth in 2012

January 29, 2012January 29, 2012 horvath Leave a comment

Over the past 18 months, The Conference Board has provided a depressing, but accurate assessment (unfortunately) of the performance of the U.S. and global economies. Overall TCB points to slower growth in the world economy in 3.2% in 2012 vs. 3.6% in 2011.

TCB divides countries into two groups – advanced and emerging. The U.S., Japan, and the E.U. 15 are the major players in the advanced group. The emerging group includes China, India, the remaining Asian countries, Latin American, Middle East, Africa, Russia and other CIS countries, and Central and Eastern Europe. The advanced economies account for 50.3% of global output and the emerging economies are responsible for the remainder, 49.7%.

In 2012 the advanced regions are expected to expand by 1.1%, whereas the emerging countries, will post a much stronger gain, 5.1%. TCB feels that parts of Europe are in a recession. The depth of that recession is likely to be determined by the magnitude of their debt crisis.

Japan is the only region that is showing an increase in the rate of output for 2012. As they recover from the tsunami and power plant tragedy that occurred last year, they will experience minimal growth of 0.7% in 2012. In 2011, their output posted a change of -0.5%.

About 22% of U.S. exports go to Europe. As well, Europe provides about half of the income earned abroad for U.S. multinational companies. A decrease in European demand could lower the rate of U.S. GDP growth and the strength of our economy. On the other hand opportunity exists for American companies exporting goods and services to the emerging economies.

Despite this dismal outlook, the U.S. posted job gains of 200,000 in December 2011. Time will tell if this increase is an anomaly, based on TCB’s dismal outlook or if we will look back to December and see it as a turnaround point for sustained U.S. growth at a higher rate.

Chance of Recession Recedes – The Conference Board

December 12, 2011December 12, 2011 horvath Leave a comment

There are signs the economy is improving. The unemployment rate is trending downward, retail sales are trending upward, and manufacturing has added jobs in 2012. For the 220,000+ unemployed Coloradans and those who aren’t captured in the UI numbers, it feels like the Great Recession never ended.

In recent months, The Conference Board (TChad demonstrated an ability to more accurately assess the economy than other groups. As a result, people took notice when they pushed the odds of another downturn up to 52% in October. A short-term historical look at TCB’s chance of recession statistics follows:
• July   17%
• August   33%
• September 45%
• October 52%
• November 32%
• December     9%

It is good news that the November and December percentages dropped off significantly. If a recession had occurred, it would have been short and shallow – barring a major shock. The economy has performed at a subpar level for so long and the recovery has been so weak that there would be little room for further deterioration in the event of another downturn.

Within the past month there has been reason to be more upbeat. Patience will continue to be a virtue as Coloradans weather the recovery.

Conference Board and Moody’s Foretell Weak Growth in 2012

November 5, 2011November 5, 2011 horvath Leave a comment

On Halloween, Moody’s released a frightfully optimistic forecast for 2012. It calls for no recession, Real GDP growth of 2.8%, an unemployment rate of 8.8% and the creation of 1.4 million jobs.

About 10 days later, The Conference Board (TCB countered with its latest take on where the U.S. economy is headed. In the spirit of the season, that update states that the economy is a real turkey.

TCB’s outlook follows:

Real GDP
2011 1.7%, up from 1.6% last month
2012 1.1%, down from 1.8% last month
2013 1.9%
TCB projects 0.7% growth in Q4 2011, while Moody’s foretells expansion in the range of 2.5%. TCB sees Q1 2012 growth of 0.5% followed by expansion of 1.2% in Q2 2012.

Consumer Spending
2011 2.1%, down from 2.2% last month
2012 1.9%, up from 1.5% last month
2013 1.6%
Consumers will remain cautious.

Capital Spending
2011 8.8%, up from 6.9% last month
2012 5.8%, up from 5.5% last month
2013 5.1%
The private sector will be less than robust in the months ahead.

Net Exports (billions)
2011-416.0, increased from -$398.3
2012 -430.8, increased from -$370.6
2013 -418.3.
There are many factors that could cause the trade deficit to increase such as higher prices for a barrel of oil and reduced demand for American goods and services in Europe.

Two things are certain. First, there is agreement that the outlook for 2012 is not robust! Second, “not robust” covers a wide range of economic conditions.

Is a Recession on the Horizon?

September 19, 2011May 20, 2014 horvath Leave a comment

The Wall Street Journal recently reported that The Conference Board has put the chance of a recession at 45% within the next 12 months. This is higher than other polls, which are more in the neighborhood of 1-in-3. TCB Chief Economist Bart van Ark’s projection is up from 1-in-3 in August and 1-in-6 in July. The WSJ noted, “For the last 23 years, a downturn has followed every time The Conference Board’s estimate topped 40 %.”

This news is significant because for the past year The Conference Board has unfortunately has more accurately projected the performance of the U.S. economy than such groups as Kiplinger’s, Moody’s, and the National Association of Business Economists. In some cases, these groups provided projections that pointed to a recovery.

The Conference Board’s outlook for the remainder of 2011 and 2012 is:

Real GDP
2011 1.6%
2012 1.8%
A slight improvement is on tap for the second half of 2012.

Consumer Spending
2011 2.1%
2012 1.9%
The consumer will not jumpstart the economy

Capital Spending
2011 6.9%
2012 5.5%
The private sector will be less than robust over the next 18 months.

Net Exports (billions)
2011 -$398.3
2012 -$370.6
Slight improvement in the trade deficit.

This is not a pretty picture!

The Conference Board – Increased Optimism for the Global Economy

April 17, 2011May 31, 2014 horvath Leave a comment

The Conference Board continued its series of upward revisions in its most recent update of its global and U.S. economic forecasts. Key points from their update follow:

• The global economy is projected to grow 4.3% this year. This rate reflects a slight uptick supported by increasing momentum in the U.S. and other major economies. The outlook for Japan is for slower growth, as a result of their triple disaster. While these tragedies will have long-term impacts, the affect on their economy will be short-lived. The Chinese economy remains strong, but previous projections appear to have been overstated, hence a slight downward revision.

• Real Q1 GDP for the U.S. is projected to be 2.1%, driven down by lower capital spending and slower consumption. Output will increase by 2.5 to 3.0% for the remainder of the year, as employment increases and stronger consumption resumes. This will push Real GDP growth for 2011 to 2.6%. While this projection is particularly conservative, it is worth noting that the Conference Board has gradually bumped it upwards, by about a point, over the past six months. It is safe to say that we are now looking at the Great Recession in our rear view mirror.

• Headline inflation will surpass 5% in Q1, temporarily driven up by energy and food costs. Year-end CPI will be just under 3.0%.

• There are signs that producers are beginning to pass on price increases to consumers. It is not known whether these higher prices will hold.

• Companies will continue to benefit from productivity gains, as opposed to investing in labor. For the moment, this is good news for companies and bad news for workers. This relationship between labor and capital is likely to change in the months ahead.

• Sales growth is the top challenge for business leaders; followed by finding talent, cost optimization, and innovation.

• The triple disaster in Japan is likely to have a minimal and temporary impact on the U.S. economy. These tragic event may cause supply chain disruptions to the automobile industry, electronic equipment, or manufacturing industries that rely on semiconductors. The magnitude of the impact is based on exposure and location.

The Conference Board highlighted three assumptions that provide the foundation for sustained growth in the U.S.

• Continued gains in U.S. employment of 200,000+ workers per month.

• The housing market is currently experiencing a double-dip “of sorts”. No further contractions will occur beyond current levels.

• Inflation will be contained.
If employment decreases, the housing market dips further or remains in the doldrums, or inflation is unchecked then all bets are off regarding the recovery.

This forecast update is particularly good news, as the Conference Board has been notably conservative in their assessment of the strength of the recovery. While there are certainly risks associated with this forecast, it is encouraging to finally hear that the word momentum is being used in discussions about the national economy.