At the New Castle County Chamber’s best attended economic forecast luncheon ever, economist Anirban Basu told more than 260 attendees on Friday that in the field of global market players, the U.S. is doing fine.
“Some say the recession will begin this year,” said Basu, an economy and policy consultant from Maryland. “But I think the consumer market is strong enough and job growth is strong enough to support us through 2016.”
Basu noted that corporate profit margins are slipping and interest rates are on the rise. He said only the consumer is really contributing significantly to growth, with state and local government spending playing a supporting role.
He also predicted two interest rate increases this year and said the second half of the year won’t be as good as the first.
“We may be transitioning very quickly from the mid-cycle stage of the recovery to the late-stage,” said Basu. “The 2017 outlook is very murky.”
Basu has been the featured speaker at the event each year. Infusing humor into global and local economic forecast, the economist said that personal consumption is the biggest contributor to the 2 percent economic growth of the U.S. in 2015.
Still, compared to countries like Brazil, which saw its currency decrease by 33 percent last year, or Russia, where the ruble declined by 20 percent compared to the U.S. dollar, the U.S. continues to set the standard.
Basu said the consumer-led recovery stops at housing ownership, now at just 63.7 percent. Basu said first-time home buyers, buried by student debt and a culture less focused on asset accumulation has effected the economic outcomes of the housing market. Millenials are opting to rent instead.
“But it will come back with a vengeance,” noted Basu. “Once people have children, they look like everybody else.”
Locally, Basu said that cities across the country are seeing the greatest influx of mellienials to their markets, and suggested that Wilmington will be a draw if it can meet that market with an ample selection of restaurants and bars.
Basu is the chairman and CEO of Sage Policy Group, Inc., an economic and policy consulting firm in Baltimore, Md.