ABA Banking Journal - May 2011 - (Page 12)

the economy | by rob strand Brighter outlook with bumps The recession has been officially over since July 2009 and inflationadjusted gross domestic product has $4 Apr 18: $3.79 now expanded for six consecutive Regular gas, nationwide average quarters. While recoveries in the past have often begun with periods of $3 robust growth, however, the economy has eked out on average only 3% annualized growth—far less than what’s needed to bring back all the $2 jobs that were lost. A range of macroeconomic statistics over the past few months point to stronger recovery ahead. Business $1 orders are continuing the broadbased growth of the first quarter, non-government hiring has turned $0 stronger, and stock prices are ris2008 2010 2004 2006 2002 ing while the dollar softens—all Source: U.S. Department of Energy are supporting growth. The Federal Reserve’s quantitative easing is bolstering the financial markets and leading to a general rise in risk-taking, as evidenced by an uptick in mergerClearly, higher oil and gas prices are and-acquisition activity. The message: the expansion is now on firmer footing. a drag on the economy. The impact Nonetheless, it is worth noting an unusually turbulent couple of months of higher gasoline prices falls more that saw gasoline prices skyrocket, U.S. armed forces drawn into a third forheavily on low- and middle-income eign conflict, the European sovereign debt crisis intensify, and a devastating households, offsetting the benefit earthquake and tsunami in Japan followed by nuclear disaster. Yet amid this of this year’s payroll tax reduction. turmoil, the U.S. economy continues to mend. In early February, most business The effects of the tragedies in Japan on the global economy are expected economists saw inflation-adjusted to be short-lived, but could negatively impact U.S. exports and our economy GDP growing in the neighborhood in the near term. The disasters are dampening exports to Asia and causing of 3.5% to 4% this year; now the some domestic supply disruptions. The export orders index for the Institute consensus is more 2.5% to 3%. for Supply Management manufacturing survey did decline in February, a However, the outlook will continue hint that the initial foreign response to the disasters has been a turn toward to dampen if oil prices keep rising, caution. And parts shortages are now expected to cut North American auto and the impact typically shows up output in the second quarter by roughly 5% relative to earlier plans, with with a lag. At this point, the effect most of the output losses in Japanese transplants. Several manufacturers does not appear to be large enough have announced assembly plant shutdowns for the second quarter. Rising to cause another recession. n oil and gasoline prices remain the wild card. Oil prices recently rose to over $113 a barrel—the highest level since September 2008—compared to less Rob Strand is senior economist than $80 last fall. Gasoline prices have risen nearly $1 a gallon over the past in ABA’s Office of the Chief year, to almost $4. The futures markets have these prices rising still further. Economist. rstrand@aba.com Gallon of gas 12  |  ABA BANKING JOURNAL  |  may 2011

Table of Contents for the Digital Edition of ABA Banking Journal - May 2011

ABA Banking Journal - May 2011
Contents
Chairman’s View
Editor’s Column
The Economy
Bank Notes
ABA Community Banking: Getting in on the Prepaid Wave
Pass the Aspirin
Tech Topics
Cover Story: #5 and Feeling Good
Smartphones Alter Banking Landscape
Compliance Clinic
Compliance Inbox
ABA Resources
Surveys & Trends
Board Matters
First Person

ABA Banking Journal - May 2011

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