Bloomberg’s recent poll of economists revealed some interesting predictions for 2010 GDP and employment. Some 60 economists were surveyed and the results ranked in various ways, the most interesting of which is possibly how successful each economist had been in the past. The top performer for the first three quarters of 2009 was Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York, is quoted as saying “the rebound in stocks and rising incomes will prompt Americans to do what they do best consume. Household spending will pick up steam as we move into the second half of 2010, the overall picture for 2010 will be an economy growing rapidly enough to bring down the unemployment rate to an average of 9.6%. Faced with dwindling inventories and growing demand, companies will soon become confident the expansion will be sustained and so the economic recovery this time will be similar to past rebounds. Increasing stock values and a falling unemployment rate will encourage consumers to start spending again. Faster growth will push Treasury yields higher, up to 4.5% by year end and help the dollar strengthen as the Fed raises interest rates, he predicts.
Maki is more optimistic than Jan Hatzius, chief U.S. economist at Goldman Sachs Group Inc. in New York, who was number one among forecasters of GDP during the 12 months through June 2009. Hatzius, estimates the economy will expand 2.4% in 2010. His 2.5% first-quarter growth forecast is half the 5% pace Maki anticipates.
The Goldman team forecasts “sub-par growth next year because “employers will be reluctant to hire and households will exhibit “a bias toward higher saving. Budget difficulties at state and local governments and credit constraints will also restrain the economy.
Robert MacIntosh, chief economist at Boston-based Eaton Vance Management, (the most pessimistic forecaster on employment this year — and the most accurate) agrees with Maki that the economy will rebound in 2010, forecasting growth of 3.5%, and that the jobless rate will average 9.5%. “The combination of exports, investment and consumption will be enough to give us, on paper at least, a decent-looking economy, he is quoted as saying.
If the economists are correct, and they all predicted solid growth just at variable rates, then industrial demand will pick up and with it metals consumption. That will be supportive for higher prices in 2010 as emerging market demand is also set to grow at between 5 and 10% depending on the market in question. The only restraint on further price increases could be the level of stocks already built up for some metals such as aluminum and nickel or the overall strength of the US dollar. A strongly rebounding economy would suggest stimulus measures, particularly low interest rates, will be removed earlier rather than later which would normally increase the strength of the dollar and hence depress commodity prices. To what extent the economists GDP and unemployment predictions are realized remains to be seen but broadly we would see their expectations supporting our belief that prices will remain firm to rising in 2010.