From Deutsche Bank, a More Bullish Scenario for U.S. Growth

Money under a magnifying glassThe U.S. economy will produce stronger GDP growth than had been expected in 2011 as it bounces back from the Great Recession, analysts from Deutsche Bank (DB) said Tuesday. According to DB Managing Director and Chief Economist Peter Hooper, positive trends developing in consumer spending, employment and the stock market will likely offset negative pressures from the foreclosure crisis, declining home values, the sovereign debt crisis and the effects of escalating oil and commodity prices on consumers. The resulting will be growth higher than the 3% most analysts had previously predicted.

During a press briefing in New York on Tuesday, Hooper said the bank is predicting moderate GDP growth in the 3.5% range for 2011, but he also said growth could rise closer to 6% under the right circumstances. The change from a low-growth to a more moderate-growth recovery is likelier now that consumers have slashed personal debt and adjusted their household spending, which is expected to have a positive affect on corporate balance sheets and the economy overall.

A 23% Rise in Equities?

As household debt has dropped to 10% of consumers' income, they've begun spending more, unleashing pent-up demand for durable goods and other items. That spending is helping corporate earnings trend higher.

Consumers have also poured more money back into equities, boosting stock values and raising the net worth of many individuals. Deutsche Bank Chief U.S. Equity Strategist Binky Chadha is predicting a 23% rise in the stock market for 2011. As consumers continue to benefit from the rally in stocks, they'll stop hording cash.

The savings rate -- which peaked at about 6% last year -- has already been declining for the last six months, coming down closer to 5%, which suggests consumers are feeling more confident about the future. Add those trends to a projected increase in business spending this year and rosier projections about accelerating job growth, and the economic outlook for 2011 becomes even more optimistic.

"Consumers are coming to life," said Hooper. However, he noted, "It is still a subpar recovery, not the normal bounceback that happens when the economy suffers such a major downturn."

What Could Still Go Wrong


Unfortunately, there are plenty of risk factors that continue to cause major drags on the economy. Uncertainty over how the government will handle the federal budget deficit, the sovereign debt crisis in Europe, the ongoing U.S. foreclosure crisis and the possibility that several U.S. states could default on their debts could potentially stymie growth.

Deutsche Bank Global Head of Rates Research Dominic Konstam also warned that because the largest banks have tightened their lending standards, and countries have begun looking at tightening monetary policies, there's a greater risk that "there may not be enough global liquidity for the global economy to continue growing." If capital markets freeze up again, it could lead to a global economic slowdown that would have a significant impact on U.S. exports, which have been expanding.

Higher commodity and oil prices could also provide a significant drag on the economic recovery this year. If businesses have to pay more for corn, soy beans, oil and other key raw materials, it could lead to higher food and energy prices, shocking consumers into a pullback on spending, which could in turn deal a major blow to the recovery.

Regardless of the negative factors, the overall upside potential for the economy appears greater than the downside, say Deutsche Bank analysts. The economy is on better footing, they assert, inflation is unlikely to be a problem and interest rate hikes from the Fed shouldn't occur until late 2011 at the earliest.


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ldavid217

The Economy would be in full swing if it hadn't snowed so much this winter. Come on Gore we need another cartoon movie! Can you believe this was an excuse for Unemployment claims having a sharp rise this week!

January 27 2011 at 11:24 PM Report abuse +1 rate up rate down Reply
Mr.Steve J.W.

America needs to take care of its own,before helping overseas. We have more homeless people then ever,and the more illegal immigrants that enter the country the less jobs.

January 27 2011 at 8:51 PM Report abuse +6 rate up rate down Reply
flathead1948

TonyV...VERY WELL PUT.

Just like people saying my house is worth $800,000. Guess what, It's only worth what somebody will pay you for it. And if you still owe on it, it probably ain't worth much.

January 27 2011 at 8:01 PM Report abuse +4 rate up rate down Reply
maryabohn

Just read in NY times that this bank foreclosed on several active servicemen homes while they were away.

January 27 2011 at 6:38 PM Report abuse rate up rate down Reply
2 replies to maryabohn's comment
Donald G

I also beleive the article stated the forclosures were illegal.

January 27 2011 at 8:37 PM Report abuse rate up rate down Reply
Steve Silva

The answer is regulated capitalism, and, a social "safety net" for those who become severely poor. This is essentially what we have now. We argue about the details. Read Upton Sinclair's "The Jungle" for an example of unregulated capitalism run amok. Read George Orwell's "Animal Farm" for the example of a socialist nightmare. We are not as bad off as the extremists would lead you to believe. One should not yell "the sky is falling" if it's simply not true.

January 28 2011 at 2:18 AM Report abuse rate up rate down Reply
Robert & Lisa

Our socialist public educational system has indoctrinated our children into believing capitalism and freedom is bad and socialism is good. If Socialism is so good, why does the long time socialist government of Mexico boast of being the #1 producer of silver, plenty of oil, and the richest man in the world, yet 99% of their people are in the poverty level making an average of less than 6 dollars a day. Corruption is rampant. The evil, ultra rich see Mexico and want to implement socialism here, where they can have all of the wealth and power and the middle class will now be among the poor. That is what their Demoncrat puppets in the white house and senate are doing to us.

January 27 2011 at 6:34 PM Report abuse +5 rate up rate down Reply
1 reply to Robert & Lisa's comment
icemanbill23

It's not a phobia when it's true.
George Soros has provided funding for several videos that are shown to our children in public schools. They depict the evils of capitalism and attempt to instill guilt for wanting to buy "stuff". Private schools (if you can afford them) or home schooling is the only way to keep our children free.

January 27 2011 at 11:53 PM Report abuse rate up rate down Reply
tom

The treasury bonds are backed by the full faith of the us government, and 58 trillion dollars in gold in reserves. Over 8 thousand tons. America is the richest nation in the world...Raising the cap above 106,000.oo would cure any problems in ss . But the need for a crisis demands taking it apart so the powers to be can steal it.

January 27 2011 at 5:58 PM Report abuse rate up rate down Reply
1 reply to tom's comment
Donald G

Tom - where in the world did you get the figure of 58 trillion in gold. No way! The total supply for the US in gold is a little ove 600 billion. And this would hardly make a debt in the 14 trillion dollar debt.

January 27 2011 at 8:40 PM Report abuse +1 rate up rate down Reply
TonyV

Imagine that I have 14 trillion dollars and you have absolutely nothing. We are a nation of two people, so our "average" wealth would be 7 trillion dollars each. Even though I have all the money and you are a starving begger.
This is how it works and this is the actual sort of mathematics that lie under all of those statistics that you read about in all of these news articles everyday. All of the positive articles are a description of my financial state, and all of the negatives are about your financial state.
Now, transpose this logic to an economy of some 311 million people in which 95 percent of the wealth is controlled by 10 percent of the population and you will realize that most of what you read in the newspapers and on the internet, or what you see on the television that speaks to "better days ahead" does not mean SQUAT to the vast majority of American citizenry.

January 27 2011 at 5:37 PM Report abuse +7 rate up rate down Reply
Davie2743

Don't ever doubt the resilience of Real Estate and buying any worthy property even now will turn out to be one of the best investments you make for yourself and your heirs, don't be swayed by these dopey reports in the news regarding foreclosures, unsold properties etc.

January 27 2011 at 3:36 PM Report abuse +1 rate up rate down Reply
1 reply to Davie2743's comment
robmerlaw

Are you still selling that old Carlton Sheets program? He hasn't been on TV for 2+ years.

January 27 2011 at 4:44 PM Report abuse +2 rate up rate down Reply
ksmwtm

Big bank, 1 of the TBTF, sent a pre-approved credit card app. BUT my interest rate would be determined later based on my credit score? Why did I get this sort-of-offer if they did NOT chedk my score? They call it the Pelosi Card--you have to sign up before you learn what your interest rate will be--from 12.99% to 26.99%----wonder where they WOULD start if I were that STUPID?----Wait---just sign & the house will go up so you can refi. & THEN you can AFFORD it----hey! so thats where those mortgage salesmen (& women)went.

January 27 2011 at 2:12 PM Report abuse +2 rate up rate down Reply
blueeyesolsen

Notice how the banksters (who conspired to destroy the middle class in the United States and create this mess) are continually spouting about how everything will be fine. They are trying to get us to start borrowing again so that they can get what little we now have left before they pull the rug out from under us for the last time, and leave an entire nation of impoverished and dependent slaves who will have only two choices: Do what the banksters say, or starve to death. Think it ain't gonna happen? Don't bet on it, they've got most pretty well dumbed down.

January 27 2011 at 1:59 PM Report abuse +8 rate up rate down Reply
1 reply to blueeyesolsen's comment
Reedcosrvcsllc

I said the same thing when Hillary and Obama were fighting for the top. It is just time. The whole population does not know how to get right with them selves first.

January 27 2011 at 7:50 PM Report abuse +2 rate up rate down Reply