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Clemson Economist say 2009 economy to be ‘subpar’
2009/03/04, 3:27 pm
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Wednesday, 04 March 2009
Staff Report

CLEMSON — A Clemson University economist projects the country might not see a positive GDP until the third quarter of 2010, but the U.S. economy should see positive movement by the end of this year.

Bruce Yandle, dean emeritus at Clemson University and director of the Strom Thurmond Institute Economic Outlook Project, said in his monthly economic report that by the end of 2009, the economy should be moving at a “subnormal pace.”

He reported preliminary GDP growth estimates of -3.8% for the fourth quarter of 2008 was revised down to a very weak -6.2% on Feb. 27. Projected numbers for 2009 yield roughly -3.6% GDP growth.

“No, I don’t think we will be seeing yellow brick road action,” Yandle said in his report. “Recovering long-run average growth of 3.5% will take longer, but I do think we will see 1.5% growth before the year ends.”

Numbers from the Institute for Supply Management on the service economy and a purchasing index indicate the economy might be bottoming out.

In the service economy index, where a score of 50 is average, November 2008 scored 37. By January 2009, it crept back up to 43.

In the purchasing managers index, activity dropped from 49 in August 2008 to as low as 33 in December. But in January 2009, the index rose to just under 36.

“Not a trend, but at least one positive observation,” Yandle said. “But the non-manufacturing indicators have formed a positive trend. In both cases, the positive movement is from a very low level of activity. But, let’s not look a gift horse in the mouth. At least the indicators are pointing north.”

With the passing of the first quarter of 2009, the recession is now 15-months-old, Yandle said, getting “a bit gray by historic standards.” The average length of the 10 recessions since World War II is 10 months. The 1981-82 recession, the longest one since 1945, went on for 16 months.

“While the recession end is not in sight, there are signs that a trough is forming,” Yandle said. “The signals include positive movement in the services economy indicator, some relaxation in bank lending standards, erratic movement in home sales data, and what looks like a bottoming in the decline of home prices. There are no signs of recovery in the manufacturing economy, but the unemployment diffusion index, while still sinking, appears to be bottoming out.”

Yandle said the current world financial collapse now has more to do with “lost trust than sub-prime mortgages or newly minted monetary and fiscal policy.”

Read Yandle’s economic report by clicking here.

Published March 4, 2009

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