Feb. 3--While 2010 is expected to be somewhat better than last year, economic growth may end the year at a lower level that it began, some panelists predicted Tuesday during the 14th annual Groundhog Day Economic Forecast on the campus of Indiana State University.

Robert Guell, professor of economics at ISU, said while the fourth quarter of 2009 had a 5.7 percent growth rate in the gross domestic product, most of that was from excess inventory and government stimulus funds.

Guell said more than half of the growth, 3.4 percent, was considered growth because inventories of products were not decreasing as fast as they had been, “so that is a statistical anomaly.”

“Consumption spending only rose 1.4 percent during the fourth quarter of 2009,” Guell said.

Guell said historical indicators that follow bad economic recessions, such as the current recession, show “positive first quarters 1/8with annualized growth 3/8 in the 8 to 10 percent range. In 1983, it was 10 percent annualized growth. We are coming out of the worst recession since the Great Depression. We have should have seen a number in the 7 to 8 or 9 or 10 percent level if this were in historical context, and it is not.”

Instead, the 5.7 percent GDP increase matches “the growth coming out of the shortest and shallowest recession in U.S. economic history.”

“I would say, in a normal situation, growth in 2010 should be between 7 and 10 percent, but I don’t think it will exceed 4 percent, so 5.7 percent is not all it is cracked up to be,” Guell said.

A massive investment boom, which included businesses converting entire offices to computers technology, helped lead the country out of a recession in the 1980s. “I don’t see anything that people are going to buy, whether businesses or 1/8personal 3/8 consumption ... so I say that 2010 will be positive but underwhelming,” Guell said.

Unemployment is and will remain a significant part of the landscape between 2010 and 2011, Guell said.

State and local government have been “shedding employment.” With little turnaround in the economy, school districts such as Vigo County will struggle to maintain current levels of instruction, “but class sizes in Vigo County and other more mature school districts will likely rise” as teachers are cut.

Cuts in education will “put a significant weight on economic growth,” he said.

Guell said some heavy weights on economic growth for 2010 include fewer jobs in state and local government; a decline in spending on roads and other structures; and a continuation of debt foreclosures.

Possible engines for economic growth in 2010 include “inventory rebuilding, and there is $1 trillion in unloaded reserves in the banks around the country,” a number that had been $6 billion on Labor Day 2008, Guell said.

That means when banks start lending, “they have so much money to lend that their pushing on the accelerator will have to be accompanied by a massive federal reserve pushing on the brakes or inflation will be there,” he said.

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