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SW Corporate Forum speaker Economic recovery underway
DALLAS (11/12/09)--Economic recovery, albeit in the early stages, is underway, a former CNBC chief economist told a packed house at Southwest Corporate FCU's recent Economic Forum. Marci Rossell told credit unions she is "absolutely confident in the real recovery of the global economy" and pointed to three signs of an improving economy: a rapid rise in the household savings rate, a dramatic drop in housing prices, and the nation's opportunity to increase exports, she said (eFACTS Nov. 10). Some say the economy won't grow until consumer spending returns, but savings has to come first, Rossell said. "This recession is fundamentally about the savings rate going from zero to 5%. People are now saving for unexpected expenses and for retirement. It is the best thing that ever could have happened. Yes, it's painful in the short run, but it is absolutely necessary for the long-term health of the economy," Rossell told the group. "Houses have been overvalued for about 10 years. The rule-of-thumb is that consumers can afford a house valued at 2 1/2-3 times their income. The median household income is $55,000 per year, but the median home price had been running about $212,000--above what the median household could afford. The market appears to have stabilized some now, and the median home price has dropped to $170,000," Rossell said. Exports will lead economic growth in 2010, Rossell told attendees. The declining value of the dollar gives the U.S. a competitive advantage in world markets, she said. Also, emerging countries such as China, India and Brazil have a portion of their population moving into a middle class and "they want to buy our goods." The recession, like the Great Depression, has altered the way people view risk. Ultimately, however, consumer spending will depend on income, which means job creation is necessary to get the economy back on track, Rossell said. Rossell predicted that in the next three months, the nation will see the unemployment rate stabilize at 10% and start declining. "That's when we'll get recovery in consumer spending," she concluded.
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