New Economic Forecast: The Bad News Isn't Really All That Bad

LOS ANGELES, June 21, 2011 /PRNewswire/ -- A new forecast finds that the U.S., California, and Los Angeles economies are picking up speed, despite the recent litany of negative reports.

The 2011 Los Angeles Economic Forecast Book, authored by Beacon Economics and released in partnership with Pepperdine University's Graziadio School of Business and Management and its Presidential and Key Executive MBA program, says the recent slaps to the economy – including the falling Case Shiller Home Price Index – are temporary, and the forecast is relatively optimistic through 2012.

"The bad economic reports of late are short-term in nature and not indicative of a longer-term trend," says Beacon Economics' Founding Partner and the forecast's lead author Christopher Thornberg. "The recovery should continue at a better pace than what we saw in 2010 by the second half of this year, but expect a slowdown in 2013 when national leaders begin to unravel the deficit."

Key U.S., California, and Los Angeles findings from the forecast include:

• The current slowdown in the U.S. economy is transitory and is due to temporary issues associated with oil prices and supply chain disruptions caused by a variety of natural disasters. Expect the U.S. to move back into recovery mode by the third quarter.
• The recent sell-off in the equity markets was needed because equity prices had gotten ahead of the recovery. Still, watch for bubble-like signs in other parts of the financial markets – especially risk spreads and cap rates on trophy properties.
• Expect slightly above average economic growth to continue in the second half of 2011 and into 2012. However also expect the recovery to stumble in 2013 as the Federal government starts to unwind the massive deficit that was built during efforts to pull the economy out of the recession.
• California's economy is set for a prolonged recovery with unemployment remaining in the double digits and home prices remaining flat through 2012.
• Although the pace may seem painfully slow, numerous economic indicators are improving in Los Angeles County including taxable sales, income, venture capital, hotel occupancy rates, and employment.

The 2011 Los Angeles Economic Forecast Book can be downloaded in its entirety at: http://beaconecon.com/Misc/LosAngeles4Print_Final.pdf.

SOURCE Beacon Economics