The year 2010 will be another up and down period for the economy, with the overall trend pointing up.
Thatâs good news, but itâs going to be a bumpy ride. The bumps include government regulation and over-reaching, continued unemployment, cautious lenders, big deficits.
On the up side there is a better business outlook, stock market recovery â despite some glitches; good export prospects, with real opportunities in developing nations; some increase in consumer spending and confidence; and continued government spending to stimulate the economy, including big expenditures on food programs.
The experts predict a continued modest recovery from the Great Recession of the past two years, which is certainly better than no recovery.
Last year this column predicted a down year, with things starting to look up a bit by the end of 2009, and increased recovery in 2010.
There would be continued unemployment, and a huge growth in government spending, regulation and government in general. The stock market would begin to recover from huge losses.
By and large that is what happened. A lot of people are nervous about the growth of government, the bailouts, the takeovers, the stimulus package, the trillion-dollar deficits, the drive to âreformâ every aspect of the $2-trillion health care business. Voters are having second thoughts and are thinking about a pullback, about putting on the brakes.
In the meantime, government grows and the stimulus money continues to flow, including more money for food stamps, feeding programs, school lunch and related programs.
Last year consumers were scared. They saw assets and jobs disappearing. They hung onto their money. Thereâs pent-up demand out there, but with 10% unemployment, combined with underemployment, that figure jumps to 17% of workers.
Wages are flat, and more than 40 million Americans fall into the poverty category, swelling the rolls for food stamps and related nutrition programs.
In many ways the U.S. Department of Agriculture is now a nutrition and consumer stimulus agency, with $61 billion spent each year to assist 60 million Americans who lack enough money to purchase an adequate diet. USDA says that the $40 billion spent on food stamps translates into $70 billion in economic activity.
New figures indicate that almost 15% of families are food insecure â cannot purchase an adequate, healthy diet much of the time. If you add all the people who are in poverty to those who are nearly poor â with incomes less than 185% of the poverty level â the number of people in economic dire straits pushes toward 90 million, or 30% of the population.
That means companies that offer good value, that provide basic staples such as food, should do reasonably well.
Supermarkets, discount stores, fast food and chain restaurants that offer deals and bargains are positioned to thrive and survive in down markets.
On the other hand, high-end restaurants and luxury dining are feeling the pinch. We saw the closing of the grand Tavern on the Green in New York, and some of the restaurants at the legendary Plaza Hotel in that city.
At the same time, I know some young adults who have pretty good jobs but are priced out of housing and travel. They are willing to splurge on good food, the freshest produce, the better restaurants.
The experts say the overall economy will grow less than 3% this year. That means we are out of recession but not back in the gung-ho days of several years ago. Inflation should remain under control with no wild price hikes.
Food prices have often been one of the best counters to inflation. In fact, consumer food prices have held steady for many months, even as many other costs spiral upward. Interest rates are expected to go up.
The stock market is not expected to experience big gains in 2010, after a healthy recovery in 2009. The market is still way off its record highs of 2007. Thereâs a lot of cash out there waiting for investment opportunities. Bonds may start to look good, with interest rates going up.
Banks are still cautious about lending, and that can adversely affect small businesses.
Foreign markets â other than Europe and Japan â are expected to see good economic growth. That makes them good export markets. These emerging markets have room to grow, with consumer demand, rising incomes, and a hunger for better foods and more variety. While Americans are hanging onto money, a lot of other people are eager to spend.
The economy may be out of the woods, and the worst may be over, but we certainly havenât climbed into the bright, sunny uplands.
What are your predictions for 2010's economy? Leave a comment and tell us your opinion.