Economist Predicts Growth in Third Quarter
August 12, 2009

As we enter the second half of the year, an economist recently predicted growth may be on the way. Dr. Martin Regalia, vice president for economic and tax policy and chief economist for the U.S. Chamber of Commerce, shared his insight during a keynote speech at the recent I-CAR Conference in Washington, D.C.

"The fact of the matter is, I think we're beginning to pull out," he said. "In the third quarter, we should start to see some growth."

Regalia pointed to several reasons for his optimism.

One is that prices are declining.

"Everything starts and ends with the consumer," he said.

Another factor is the ongoing results of the economic stimulus package passed earlier this year.

"People only now are starting to realize how close we were to the edge of the abyss," he said. "Businesses couldn't get credit … The entire capital market was not functioning."

But now, things are different, he said.

"The fact of the matter is, we're still here and we still have a banking system," he said. "We were that close and I think we're pulling out of it now."

The economic stimulus package, Regalia said, continues to play a role, even if some believe it had downfalls.

"The package wasn't timely, tempered or targeted, but the one thing it was was big," he said. "It was big and we needed it at the time."

Though the economy is cyclical, Regalia said this isn't the usual, normal cycle.

"This time, we're seeing very weak consumption," he said. "We've been not only seeing a steep downturn, but an unbalanced downturn."

With regard to consumption and how consumers have reacted to the economy, Regalia compared the nation to Japan.

"We work to spend, and they work to save," he said.

But, he noted, if more Americans are able to find jobs again and grow their incomes, spending will inevitably pick up.

"If we can generate income growth, you're going to generate spending," he said. "In the last couple of years, we've seen major declines in wealth."

The stabilization of the stock market should help with this, he said, and this will "spur wealth."

Even when speaking to a group of collision repairers, Regalia emphasized that the housing market is important to the overall economy.

"New home sales and prices have stabilized a bit," he said. "On a year over year basis, they're down, but on a monthly basis, they've stabilized … and stabilization is an uptick."

But Regalia wasn't completely optimistic.

"We still have this subprime piece of the market and that's a problem," he said. " … We're still seeing the delinquent rate go up and we're still seeing high levels of foreclosure."

But, we're still getting there, Regalia said.

"We've got to kind of walk before we can run," he added.

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