2010 Economic Outlook

No Double-Dipping in 2010, but Watch Out for 2011

The global repair process continues. The U.S. upturn appears to be proceeding at a pace somewhat faster than the consensus was expecting a few months ago, and is more vibrant than the recoveries seen to date in most other developed countries. Trade-oriented economies in the developing world continue to grow rapidly.

The U.S. yield curve has steepened to near-record levels, indicating a very liquid monetary environment. The odds are high that economic activity will continue to accelerate as businesses replenish inventories that have been worked down to very low levels. This in turn should lead to increased levels of employment and consumer spending, setting in motion a virtuous economic growth cycle.

We expect a sustained economic recovery in 2010, although there remain obvious areas of weakness — the household sector, small business, state and local governments and construction.

Economic challenges are building as 2011 comes into view. Increasing tax burdens and the winding down of the Obama stimulus program could hamper the expansion more severely than generally expected. Higher costs, stemming from increased industry regulation and financial reform, also have the potential of impeding economic growth.

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2010 Economic Outlook

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