Spring 2007

Top Global Forecaster Allen Sinai Predicts “Seismic” Economic Shifts Ahead for U.S. Economy

Internationally-recognized economist and economic forecaster, Dr. Allen Sinai, addressed the rising and falling fortunes of the U.S. versus the rest of the global economy during a lecture Nov. 14 at the Bryan School.

“The rest of the world is no longer driven by the U.S.,” said Sinai, president of Decision Economics, Inc. “That’s a seismic shift.”

Sinai, whose Sinai-Boston Large-Scale Quarterly Macroeconomic Model is one of the largest such models, had more sobering than uplifting news for what lies ahead for the U.S. economy. With the U.S. losing ground to countries such as China and India – whose economies are expanding at rates of 11% and 8% annually─ Sinai speculated that the U.S. economic growth could stall even further.

“The rest of the world is speeding up in growth, even as the U.S. is slowing down,” Sinai said. Concerns over terrorism and the war in Iraq have damaged U.S. standing abroad, he added.

Sinai further predicted that a recession could occur in 2008-2010 as part of a cyclical downturn in the U.S. economy. Still, he noted that the stock market would gain strength in 2007. “The stock market tends to perform well in the year before an election and serves as a good hedge against inflation,” Sinai said. He maintained an equally positive outlook for the Chinese and Japanese stock markets.

Sinai expressed cautious optimism that certain “pluses” in the U.S. economy, such as  low mortgage and unemployment rates and a strong corporate sector, can help the economy offset loses from a “wounded” housing market and its ripple effect on other sectors of the economy.

” The central banks will inflict pain if they think the economy needs it,” Sinai said. “We are all uncomfortable about living beyond our means.”