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Market Forecast for 2010
The best news is that some key economic data now signal a broad move to positive territory. “The recession has ended and we are looking at a modest recovery in 2010,” says Sophia Koropeckyj, managing director of industry economics at Moody’s Economy.com, a research firm based in West Chester, Pennsylvania.
Following significant gains in early 2009, the pace of improvement has slowed but still remains positive. The data indicate that total real personal consumption expenditures will increase by about 1.8% during 2010, the slowest exit from a recession in consumer spending in the post WWII period.
Business owners are rightly concerned with low consumer confidence levels. “Most measures of consumer confidence are still very low,” says Scott Hoyt, senior director of consumer economics at Moody’s Economy.com. No secret why: Stubbornly high unemployment and a moribund housing market are key de-motivators.
We do not expect a recovery in employment until 2013. Because of this, the industries most dependent on consumer spending will be the ones that recover the latest.”
“At least through the first half of the year, consumers will be asking, ‘Where will the money come from to spend?’” says Hoyt. “People are still paying down their debt and there are no capital gains to realize. Interest rates are low and dividends are not increasing.”
While that’s enough to put a significant drag on things, there is rosier news in the housing area. “Housing prices are expected to keep falling for another few quarters, but the market in terms of construction and sales is close to bottoming out,” says Koropeckyj. “Sales have inched up in large measure because of improved affordability and the sales of foreclosed homes at deep discounts.”
In the next two or three months, we will be getting a more solid feel for how 2010 will shape up. “I think we’ll know by no later than March the trajectory of the recovery,” says Chicago-based consultant James Dion. And his forecast? “I think people will be surprised by how fast the recovery comes in 2010,” he says. Why? “Three words: Pent up demand.”