Paul Kasriel: 2011 Economic Outlook – Credit given Where Credit is Due
Paul Kasriel, Chief Economist of Northern Trust, has just produced his annual economic forecast. Here are some of the key takeaways:
- The pace of economic activity is expected to accelerate in 2011 on a Q4/Q4 basis largely because of increased growth in credit created by monetary financial institutions.
- Housing and state/local governments are sectors that will remain a drag on economic growth.
- Exports are and likely will remain a star performer of the U.S. economy.
- Inflation, while remaining low in absolute terms, is expected to increase modestly.
- Money market interest rates are anticipated to remain near current levels because the Fed is not expected to raise its policy interest rates in 2011.
- Bond yields are expected to drift higher as real bond interest rates continue to “normalize”.
- The principal upside risk to economic growth and interest rates is that private monetary financial institutions sharply increase their credit creation.
- The principal downside risk to economic growth and interest rates is that Chinese economic growth decelerates sharply.
- Federal budgetary issues are not a near-term threat to economic growth, but are a long-term threat.
Click here for the full PowerPoint presentation.
Source: Paul Kasriel, Northern Trust, January 2011.
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