Three visits to the Boston area in the last 8 months have shown me that the American consumer has lost some zest, and zeal. Discount sales in outlets have hardly abated. We now receive plenty of time and attention from staff in smart shops, either in shopping malls or in Newbury street. Beaches on the coast are not exactly crowded and last minute vacationers can find accommodation. There is less than the traditional ‘cheerfulness’ around, in the United States.
Business leaders are hesitant too. There are plenty of uncertainties about the American economy. The initial rebound witnessed in the stock markets served as testimony to the remarkable resilience of the American economy. The financial industry was bailed and saved by the federal government, shifting concerns and debates to getting the right policy mix of extended stimulus and future budgetary restrictions. Yet there is nagging feeling that this economic crisis might bear deep lasting damages: Big cuts in State budgets for health, education and infrastructures; sticky high unemployment, impairing a turnaround in real estate. Finally growth prospects are clouded by a stronger American dollar, and by increased competition from the emerging champions of Asia.
Resilience in company profits might well cheer the financial market participants. But the economic mess might actually take a few more years to clean up than expected. We should by all means avoid the lost decade of Japan, but this is clearly not the standard recession. We are coming to see higher deflation threats in advanced economies, while inflation and asset bubbles are heating up in key emerging economies. This all points to international volatility for the rest of 2010 and patchy growth prospects. The winds are shifting: Clouds or sunshine ahead?
André Du Sault
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