17 May 2006

China close to edge

The U.S. economy in 2007 will be OK, but things will start to slide in 2008, and there will be a recession in 2009, said economist Alan Beaulieu at the 13th annual Control Systems Integrators Association Executive Conference in Panama City, Fla.

“So no big capital investments after this year and don’t hire that corporate VP unless you’re really comfortable with and can afford to lay people off,” Beaulieu warned.

While the recession will, of course, be unwelcome in the U.S., it may have profound effects in China. When the West pulls back on its imports from China, the economic distress that will cause the already 900 million disgruntled Chinese may lead to real social problems, he said.

Beaulieu, who works for the Institute of Trend Research, figures of the 1.3 billion people in China, there are 400 million members of the upper and middle class who are doing well these days. The rest are struggling to put food on the table, he said.

“The U.S. recession will stem from the burdensome budget deficit that the Bush administration is incurring, high interest rates, demographics that will see the baby boomers retiring in droves, high inventories in the U.S., high oil prices, and troubles in the housing market relating to home prices,” Beaulieu said.

“We will elect a Democratic president in 2008” and “China will not be the #1 economy in the world in 10 years” were a couple of other notable predictions Beaulieu made.

—Nicholas Sheble

For related information, go to www.isa.org/productivity.