While the resolution of Greece’s banking crisis weighs heavily on the short-term health of the U.S. economy, the fundamentals of the American economy are strong enough to avoid a recurrence of the devastating 2008 recession, a top Riverview Bank official told East Vancouver Business Association members Friday.
“I don’t see us dipping into a recession,” said Chris Butler, vice president of Riverview Asset Management Corp. “It’s going to feel like a bit of a recession, but it won’t be one.”
Butler’s talk swung between optimism over indicators of steady recovery and cautionary messages to his business audience about continuing economic weaknesses. “If you’re not already in survival mode, that’s the mode you need to be in,” he said. In the next 12 months, we’re not going to see much improvement.”
Good, bad news
First, the good news, which was presented in handouts to dozens of business association members meeting at Riverview’s 162nd Place branch. The nation’s Gross Domestic Product has risen for the last eight quarters. Manufacturers report an increase in weekly hours worked and businesses are sitting on huge piles of cash. “There is a lot of money in our system waiting to do something,” he said.
But each of those indicators has a not-so-silver lining. GDP growth has slowed in recent months, businesses are saving when investments would stimulate the economy, and the manufacturing recovery is built more on efficiency improvements than an increase in jobs, Butler noted. Meanwhile, yields on treasury bonds are dropping due to a glut of investors who are parking cash in the bonds as a safe haven, he said.
Back on the positive side, Butler reported a rise in consumer credit, suggesting that Americans are willing to borrow and spend, stimulating the economy. He saw few signs of inflationary concerns in commodity prices, predicting little inflation over the next six to nine months.
Yet consumer confidence remains low, recently dipping back to 2008 levels, Butler noted. He attributed that sentiment to negative news reports about the economy that he said are often incomplete. “People need to stop watching TV,” he said.
Another set of economic indicators show increases in household net worth and savings. Those are generally good signs, Butler said, but some of that recovery of household health is due to foreclosures that erased mortgage debt. Further, an increase in household savings presents a conundrum to economic analysts, who encourage both personal savings for household health and spending to keep the nation’s economy moving.
Finally, Butler presented seemingly worrisome results of a recent Business Roundtable survey, indicating dramatic reductions in business optimism about hiring and growth prospects, as a possible bit of good news. History indicates that business optimism often ebbs just before a strong recovery, he said.
Until that happens, Butler suggested that businesses preach the gospel of optimism. “We have to communicate that things aren’t as bad as they seem, that our community is vibrant,” he said. “We need to hear stories about how good things are.”