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The Economic Wild Cards in Play

February 2, 2012
By: Sara Schafer, Farm Journal Media Business and Crops Editor

When trying to make economic predictions, you have to plan for the unknown. "Every year is filled with surprises," says Vince Malanga, LaSalle Economics, who spoke at the Top Producer Seminar in Chicago, Ill., this week.

 

He notes the three wild cards in 2012 will be:
 
Oil prices: "Demand around the world is slowing down," he says. He expects current oil prices to stay around current levels. But, oil prices can always fluctuate since oil comes from unstable parts of the world.
 
Election year: Because there is an incumbent running for reelection, you have to be ready for surprises to help them protect their electability, Malanga says.
 
Stock market: "The stock market is a great barometer of public opinion," he says. If history is any guide, he says, that when you have a good first week of January in the stock market, the month of January is a good month, which was the case for this year. Additionally, history shows that if January is up in the stock market, the year also tends to be good.
 
With these uncertainties, Malanga predicts 2012 to be the year of paralysis.
 
"The global deleveraging process that began in 2008 is still with us. That process has been highlighted by spotty and lethargic growth in the U.S."
 
He predicts, with all these factors in play, a global GDP rate of 2.5% at best.
 

The Good Economic News

Malanga says the upshot of this situation is inflation can continue to be pushed out further into the future.
 
Also, he says, the U.S. has become much more competitive on a global basis because:
  1. Productivity has been strong.
  2. Wage growth has been very tepid, which is making U.S. labor costs more competitive on a global basis.
  3. Exchange rate has been moving in favor of the U.S.
 
He says when the U.S. becomes more competitive, more goods will be produced in the U.S. again, as opposed to the kind of outsourcing that has been so rampant over the last several years.
 

 

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See all of the news, photos, videos and more from the 2012 Top Producer Seminar in Chicago, Ill.

 


 

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