Thursday, November 18, 2010

OECD Forecasts gloomy for next two years for North America.

The OECD has forecast a gloomy forecast for the next two years for growth and employment in North America.

In the United States, the slowing recovery will mean gross domestic product growth sputters to 2.2 per cent in 2011 after a 2.7-per-cent expansion this year. U.S. economic growth will then pick up to a 3.1-per-cent pace in 2012, helping the jobless rate fall to 8.7 per cent that year from 9.7 per cent in 2010, according to the report.

Canada’s economy will grow 3 per cent this year, 2.3 per cent in 2011 and 3 per cent in 2012, the Paris-based OECD said Thursday in its latest outlook for member countries, and the unemployment rate will drop from 8.1 per cent this year to 7.4 per cent by 2012.

The real estate markets in both countries are key to the recovery, but currently are facing immense challenges of declining growth and falling values - more so in the United States.

Our good friend Gary Shilling of the "The Age of Deleveraging" fame has this to say about the prospects in the coming years.

He details nine reasons why real GDP will rise only about 2% annually in the years ahead— far below the 3.3% growth it takes just to keep the unemployment rate stable. Those nine reasons include:
1. U.S. consumers will shift from a 25year borrowing-and-spending binge to a saving spree. This will spread abroad as American consumers curtail the imports of the goods and services many foreign nations depend on for economic growth.
2. Financial deleveraging will reverse the trend that financed much global growth in recent years.
3. Increased government regulation and involvement in major economies will stifle innovation and reduce efficiency.
4. Low commodity prices will limit spending by commodity-producing lands (read Canada)
5. Developed countries are moving toward fiscal restraint.
6. Rising protectionism will slow, even eliminate global growth.
7. The housing market will be weak due to excess inventories and loss of investment appeal.
8. Deflation will curtail spending as buyers anticipate lower prices.
9. State and local governments will contract.
So long until my next.


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