Reassessing the 2011 Outlook

The Case for a More Moderate Reacceleration in Growth

Mar 15, 2011, 19:16 ET from Mesirow Financial

CHICAGO, March 15, 2011 /PRNewswire/ -- Earthquakes, Tsunamis, Floods, Nuclear Disaster, Political Uprisings, Surging Oil Prices, Crop Freezes, Europe's Deepening Debt Crisis, Budget Cuts at the Federal, State and Local Levels. Such headlines have rocked the world since we adjusted our 2011 forecast for the U.S. economy one month ago. It's time for a new look.

View a video featuring Diane Swonk discussing the knock-on effects for the world economy in the March issue of Themes on the Economy®. Read this month's issue.

"The economy is still expected to accelerate in 2011, but not enough for most Americans to pop champagne corks and celebrate anytime soon," says Mesirow Financial Chief Economist Diane Swonk. She points to a list of factors likely to slow the pace of recovery:

  • "The reacceleration in consumer spending will persist in a far more muted fashion, as wages and employment will be slower to pick up."
  • Private sector firms will now be "more inclined to substitute capital for labor," and further invest in equipment.
  • Higher oil prices have reached the gas pump, cutting into consumer budgets that were already tight.
  • Lean credit conditions exclude all but the most credit-worthy, so that cushion is gone.
  • Distressed sales continue to weigh on the housing market, and will until 2012.

Events in other parts of the world, from political uprisings in the Middle East to the worst earthquake in Japan in 130 years, all contribute to investors' sense of uncertainty. Even safe-haven buying won't keep Treasury yields from rising in 2011.

Corporate profits, hit by higher input costs and slower economic growth, will be smaller. Even so, Swonk expects to see a rebound, confirming that, "Our forecast for 12,700 on the Dow Jones Industrial Average by year-end holds."  

The March issue of Themes on the Economy® as well as archived issues can be found at

Mesirow Financial is a diversified financial services firm headquartered in Chicago. Founded in 1937, it is an independent, employee-owned firm with more than $43 billion in assets under management and 1,200 employees in locations across the country and in London. With expertise in Investment Management, Global Markets, Insurance Services and Consulting, Mesirow Financial strives to meet the financial needs of institutions, public sector entities, corporations and individuals. For more information about Mesirow Financial, visit its Web site at

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