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A. Marshall Acuff Jr. of Cary Street Partners addresses the crowd Thursday at the chamber's Annual Meeting and Leadership Recognition Dinner. |
Friday, July 17, 2009
By GINNY WRAY - Bulletin Staff Writer
The recession is hitting the bottom, but recovery will be slow, a financial analyst told the Martinsville-Henry County Chamber of Commerce on Thursday.
A. Marshall Acuff Jr. of Cary Street Partners, a wealth management and investment banking business in Richmond, made that prediction at the chamber’s Annual Meeting and Leadership Recognition Dinner at Chatmoss Country Club.
He noted that the recession began at the start of 2008, although the stock market peaked in 2007 and the housing market peaked the year before that. But in June 2008, “the appetite to take risk shifted,” he said.
By the fall of 2008, the situation deteriorated, with the markets frozen and the banks and financial system in crisis, he said.
Now, Acuff said, the worst is past, although there will be what he called aftershocks — such as the CIT Group Inc.’s brush with bankruptcy Thursday after it was denied a federal bailout. But the financial markets are operating normally and the “appetite for risk is returning,” he said.
Credit remains tight because banks are attempting to rebuild, but that should improve, he said. Also, he said, the savings rate has risen to 8 percent and could go higher, and federal stimulus funds are beginning to have an effect on the economy.
“The government replaced consumers as stimulus of the economy,” Acuff said, expressing concern about the debt that will create and the strategy to handle it long term.
“Consumer spending has started to stabilize, as is the economy itself,” he said, despite continued pressures on jobs, income and other areas.
But it will take time for people to pay off the heavy debts they have been carrying, which will slow the pace of the economy’s recovery, he added.
The good news, Acuff said, is that exports have grown, America is importing less, inventory liquidations appear to be over, and there seems to be a better balance between inventories and sales.
The Federal Reserve is projecting a 1 to 1.5 percent decline in the economy this year, and 2.1 to 3 percent growth in 2010, Acuff said. But 3 percent is needed to increase employment, he added.
“2011 has the potential to be a good year” with 4 percent growth, he said. He added that the Federal Reserve projects growth of 2.5 to 2.7 percent after that.
Nationwide, unemployment is projected to average 5 percent in the long term and 10 percent in the short term, he said. The Federal Reserve also thinks inflation will remain around 2 percent, but Acuff said he thinks that is open for debate.
The leader in the recovery worldwide is China, Acuff said. Its second-quarter growth was 8 percent, its savings rate is 50 percent, and it has a trade surplus. “That’s where the growth is,” he added.
“If there is sunshine in the future,” it is in the rising savings rate, he said. Savings equals investment, and savings can be used to pay off some debt, he said.
Savings also “might be used to build infrastructure in, of all places, manufacturing,” Acuff said.
The cost of production drove it offshore, he said, but that is not a stable situation, and costs are rising. He said he is confident that manufacturing will return to this country and become the future of the economy.
Acuff also noted that the Henry County-Martinsville area has faced dramatic economic challenges, as have many other areas. To cope with that, he recommended focusing on local cooperation, local efforts and especially education. |
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