U.S. Economy Acting Just Like a Typical Teen-ager, Says UCF Report
May 30, 2008
The U.S. economy resembles a typical teen-ager who gulps down energy drinks to get a boost through an exam or big game. What happens in the long run depends on his ability to recuperate.
University of Central Florida economist Sean Snaith draws that analogy in his second-quarter 2008 U.S. Economic Forecast, which was released today. Snaith says the tax rebate checks that began arriving this month and will continue through July will provide the U.S. economy with a short-term jolt.
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Snaith forecasts more turbulence before seeing some relief at the end of 2009 and the beginning of 2010. But there is a big caveat.
"If oil prices keep rising, it could send consumer spending and the U.S. economy with it into a nosedive,” he said. "Energy prices are the current economic X-factor."
A few months ago, the $200 a barrel of oil mark seemed unreachable, but with gasoline prices rising every few days, the mark no longer seems out of reach. The increase in prices is starting to change consumer behavior. For the first time since 1991 gasoline consumption is down in the United States by 1.1 percent, and many consumers say it is because they are paying more at the pump.
Snaith’s forecast covers economic predictions through 2010.
To view Snaith’s entire economic forecast, visit http://www.iec.ucf.edu.
Other highlights include:
Buyers, builders and bankers will only tiptoe back into the housing market’s water, thus prolonging the time it takes for the economy to pull itself out of the current slump.
Job losses continue with unemployment peaking at 5.8 percent in 2009 before falling back to 5.5 percent by the end of 2010.
In good news, the multi-year depreciation of the dollar against major trading partners will finally end in 2009, and the dollar may increase in value in 2010.
Retailers and consumers can expect another tough holiday shopping season in 2008.
The budget deficit is estimated to increase by more than 200 percent over the 2007 deficit of $162 billion by 2010.
Given the gloomy forecast, Snaith suggests that Federal Reserve Chairman Ben Bernanke may be jealous of Disney Channel character Hannah Montana. The character is a normal teen by day and a rock star by night. She has the best of both worlds. Meanwhile, Bernanke is fighting a recession and sustained inflation – the worst of both worlds.
Snaith is the director of the UCF Institute for Economic Competitiveness. He is a national expert in economics, forecasting, market sizing and economic analysis. He authors quarterly reports about the economy. Snaith is also a member of several national forecasting panels, including the Western Blue Chip Economic Forecast panel, the National Association of Business Economics Quarterly Outlook Survey Panel, the Federal Reserve Bank of Philadelphia's Survey of Professional Forecasters, Bloomberg U.S. Economic Indicator Survey and USA Today Economic Survey Panel. Blue Chip named him the most accurate forecaster for California in 2006.
The UCF Institute for Economic Competitiveness' mission is to expand public understanding of the economy by convening business leaders, scholars, policy makers, civic groups and media to discuss critical issues.
