United States Economic Forecast

by | Oct 3, 1993 | Articles

Originally Published in 1993

The U.S. economic slowdown in the late 1980’s was enlarged due to the global economic slowdown. President George Bush tried to get americans to accept patience, as growth was nearby. He pushed for global economic improvement and more exports by the U.S. as it was competitive in other markets. The dollar was getting weaker as the U.S. started to export more and it helped the balance of trade.

 

However, due the global economic slowdown increasing in other countries the dollar became stronger. Some countries began to revalue their currencies. Cuts in spending, buying, building, increased job layoffs, bank failures, restructuring of major corporations became overwhelming. This has caused the economy to slowdown longer than anticipated.

The federal government tried to curtail this slowdown by reducing the finance rates to an all time low to spur spending. However, the bank failures could not support this effort. Unemployment is rising thus costs associated with this will increase causing further problems. The prime bank lending rate in the U.S. is presently about 6%; while 25 year home mortgage rates are averaging about 7%; and Commercial Deposit accounts are only paying about 3.5% Even with this low percentage the economic recovery is slow.

 

The issues at hand are:

Overspending by the government

Companies to maintain competitiveness locally and abroad

Employment and creation of new jobs

Taxes

Health care

The new administration headed by President Clinton is looking to spur the economy by change. It is this change concept that put him into office. However, the 1990’s both in the U.S. and globally are a different economic situation then in past years. The problems of rich spending by government and the over building by developers of office buildings are real and present. The change in production of cars, stereos, televisions, steel industry, clothing, and many other products has shifted from the U.S. market to more competitive markets. The idea of an open market with Canada and Mexico is raising many questions by workers how this will help them in the U.S. Never before has the U.S. seen banking problems as it has today both in residential and commercial. Therefore, what change can the Clinton administration make that will improve quickly this economy?

The global economic market is primarily divided into three areas, North America, Western Europe, and East Asia (mainly Japan with Korea, Taiwan, Hong Kong and Singapore supporting it). This represents about 80% of the world trade. Western Europe as a whole will grow less than 1.5% in 1993. Even the E.E.C. will not help this market increase more rapidly. The dollar slowdown in most countries, coupled with the opening of Eastern Europe, higher interest rates, and now the German market unification, has put to much pressure on Western Europe. This will obviously also affect the export market for the U.S. as Western Europe is a most important trading partner.

North America, Canada and Mexico represent the largest percentage of exports for the U.S. However, Canada is forecasted to grow only 2.7% and Mexico 4%. The NAFTA, North American Free Trade Agreement, should especially help Mexico increase further if passed this year by all three countries.

East Asia will be fueled by Japan as usual. It is anticipated they will recover more quickly this year than other nations. However the lack of credit the banks are offering business will slow down this recovery as money is not made available. Japan should increase this year 2.4% This is not great but is realistic. The main reason is the $86 billion dollar fiscal spending announced in August 1992. The other countries in East Asia should grow at 6%. This will hopefully offer the U.S. market and expanding export market.

The U.S. is forecasted to grow only by 2.5% – 2.8%. As Clinton takes control and the democratic political party get into the swing of things government spending should increase. It may mean that the american workers will have to pay with higher taxes and other hidden taxes. It is also suggested to raise duties on imports as Japan and others are attacked for dumping in the U.S. market. Many things will happen this year in the U.S. market and everyone is just waiting to see what action this new political leadership will avail. The present unemployment is about 6% and may go higher before year end.

The mentality of workers and business owners is cautious and open minded. However, this conservative attitude will not excite the economic growth the U.S. needs. Even with growth that is forecasted, employment is not going to improve quickly. Companies are not rehiring.

The U.S. will need to look into other export markets such as South America. This potential market can be the long term future of the U.S. economic growth. It will and is looking into the old Soviet Union to assist in their development as well as Eastern Europe.

There is much opportunity for growth worldwide as the underdeveloped countries are expanded and assisted to grow. Look at Singapore, Malaysia, Indonesia; or at Argentina, Brazil, and Venezuela. These are vast markets with large and growing populations. China is also improving its economy. The large population of China offers a large potential to exporting countries. The economy in China should improve at rates above 12% per year. India also has one of the largest growing populations that may over the next decade or two offer many countries export opportunities.

Building and construction in the U.S. are down and will remain so. The major areas of potential are restoration, renovation, and remodeling in both small commercial projects and residential projects. The slow increase in residential housing will not maintain the present market suppliers of construction products. It is predicted that in 1993 the construction activity will grow by 8 percent with homebuilding again leading the industry growth. Per F. W. Dodge, a division of McGraw-Hill’s Construction Information Group, total contracting for new construction is expected to grow to a high of $267 billion. Therefore, many small companies and some large will go out of business or drastically reduce their power in the market. Restructuring of companies to survive in these economic times is most important. Major corporations such as IBM, Coca Cola, General Motors, and others are going through changes presently.

The change that President Clinton is proposing for the American market will be slow in coming. Whether he can turn things around for the American market quick enough to satisfy voters is questionable. However, the american voters are counting on change and young blood in the political offices that will look at the needs of the 1990’s.

This decade will be one of restructuring and establishing more sound competitive companies. The stone business is not going to rebound quickly since it is at the tail end of recovery. We shall not see the level of stone usage during the rest of this century that we saw during the 1980’s. We will see a gradual growth of stone but primarily in small renovations, residential, and restorations. The main interest presently in stone is in low priced products, as well as limestone and slate.

The areas that have or are in decline for usage of stone the most in the U.S. are presently the Northeast, southern Florida, and California. The areas of biggest opportunities are the Southeast, Midwest, and Texas.