2008 Economic Forecasts

I attended a breakfast briefing last week at the Santa Clara University. The topic was on the Economic Outlook for 2008. The talk was refreshing considering that we're being bombarded by the gloom & doom news in the media. The speaker, Mario Belotti, an well respected Macroeconomics Professor at SCU. Here're some of the stats and key points that he shared with us, and in turn, I would like to share them with you:

• The Fed will do everything possible to help the financial markets
• Banks have been able to find funds (ie. Citigroup got $7.5 billion in funding from other sources, and other banks received $12 bil)
• Prediction for 2008 is 1%-1.8% growth rate, and Q1 being 0%
• Consumer confidence is down, but consumption is still up, and he doesn't expect that to change
• Consumption was up, and disposable income was up too, so consumers are not solely relying on cash withdraws from home equity
• If we combine equity and income, consumption should have been at 8%-10%, but in reality, it was about 3%-4%
• Gas pricing have gone up and gotten a lot of attention, however, the total gas consumption as a % of disaposable income was 2.8%, and other energy resources was about 2%. 5 years ago it was about 8% combined.
• According to Mortgage Bankers Association, for the week ending Jan 11, 2008, mortgage application was up by 28%, highest in 4 years (increase in purchase transactions 11%, refinance was up by 43%)
• 2007 created 1.5 million new jobs
• Manufacturing sector was down, while the service sector was flat, this is about 80% of the economy
• Declining value of the dollar increases US export volumes. In 2007, export went up 12.5%, while import went up 6%, and he expects 2008 to be about the same
• Business spending are expected to be up 4%-5%
• The expected 1.8% growth rate in 2008 is about 50% of the potential growth in a healthy economy, which is about 3%

Amongst many other stats, the main point here is that we may be not growing at the rate that we would like to see, things may not be as bad as the recession that everyone is talking about. The lessons I took away were:

1. Instead of relying on what we get fed by the media, it's always a good idea to dig into the numbers ourselves (being a numbers person talking...)
2. As in any situation, you can see the glass half full, or choose to see it as half empty. The question is how do you make the best of situations that's beyond your control?
3. Things may not be as bad as the media has been portraying, and it's up to us to find new opportunities. That's the question I ask myself everybody: who can I help the most in the current market?