Conerly's Outlook on U.S. Economy A Mixed Bag

DANA POINT, Calif. — In a nutshell, Bill Conerly’s perspective on the state of the national economy is not all doom and gloom. The renowned economist and senior fellow at the National Center for Policy Analysis shared his thoughts on some of the changes credit unions can expect to see the economy go through and how they will impact CUs and their members. Overall, Conerly says the economy in 2007 still shows a positive picture. He expects the growth rate to taper down to just below 3%, and the economy will be “a little weaker” than in previous years. “But that won’t be discernable to the average consumer in the street,” he says, noting he estimates there’s a “one in four chance of there being a recession in the next year and a half.” He also forecasts that the Fed is done raising interest rates. There’s about a 12 month lag time when the Fed raises rates to when the impact starts to show up in the economy, so “there a lot of slowing pressure in the pipeline right now.” The one area of the economy Conerly expects to see take the most noticeable downturn is the housing industry. He estimated a quarter to one-third of home sales over the past few years were to investors who counted on being able to easily flip homes. He’s also troubled by the fact that ARMs will begin to readjust soon and will put a lot of homeowners in jeopardy, especially those who have been “borrowing from the future” by using the previous low interest rates to buy homes sooner than they would have been able to otherwise.