Economists with The Conference Board are projecting a slow recovery for the global economy next year. Much of the growth will come from emerging and developing countries, while only moderate economic growth is projected for the U.S. in 2010.
The group also cautioned that the recovery will remain fragile, as growth in some sectors – such as capital spending by corporations – will be balanced out by continued retraction in others, like commercial real estate. Consumer spending is also likely to remain flat or below previous levels, which could reduce inventory replenishment activity—which is a major source of freight for truckers.
“The 3.5% expansion in third quarter U.S. GDP [gross domestic product] shows we have clearly begun to emerge from the trough,” said Bart van Ark, chief economist with The Conference Board. “But there’s still a long way to go, and we still don’t know enough about the sustainability of these recovery signals.”
He is, projecting fourth quarter GDP growth of 3.1% for the U.S. However, consumer spending is expected to fall flat during the holiday season, while exports will recover more slowly than in the third quarter this year. Finally, any modest uptick in investments in equipment and software will most likely be offset by continued declines in commercial real estate, van Ark added.
With all that being said, van Ark noted that The Conference Board predicts global growth should resume in 2010, with global output per head returning to pre-crisis levels.
“Looking further out, emerging and developing economies will account for a much larger share of the global pie; as much as two-thirds by 2016,” van Ark added. “And while China will surely be a major force in the unwinding of the crisis, we'll see other emerging markets increasingly fueling global growth.”
He said the advanced economies’ share of world GDP has fallen from two-thirds in 2000 to below 50% today and will hit one-third by 2016, according to The Conference Board’s Global Economic Outlook. China will remain a dominant economic force, but its growth will gradually slow as its transition proceeds to a consumer-driven economy, van Ark added.
For the U.S., economic growth is projected to start slow in 2010 and pick up speed in the second half of the year, with GDP climbing 1.2% in the first quarter, 1.8% in the second quarter, 2.1% in the third quarter, and reaching 2.6% in the fourth quarter of 2010.
For all of 2010, van Ark expects U.S. GDP to grow 2%, compared to a projected decline in GDP of 2.4% for 2009 and a meager 0.2% increase in GDP back in 2008.
“Though these are not sharp improvements, given the depth of the recession, these are clear indications that we are in a recovery mode,” he stated. “That said, shifts in the drivers of growth raise questions concerning the recovery’s solidity. A less powerful inventory boost with no positive offsetting contributors may well limit GDP growth to 1% in early 2010. [Also], the [consumer] savings rate will remain relatively high at 4.5% to 5% of disposable income, dampening improvements in real consumer spending.”
He also noted that consumer expenditures are likely to continue to show weakness as income growth remains slow or even shifts negative – due in part to an unemployment rate that will stay high at 10.5% for several quarters and not begin to decline before the end of 2010.
“The U.S. economy continues to look better than expected in the short term, but we have only just begun to emerge from the cycle’s trough and there is still a long way to go,” van Ark added.