In Punxsutawney, Pennsylvania, there lives a fat rodent called Phil whose job it is in the middle of every winter to tell us how much longer we must suffer through the cold and dark until spring. Phil is a groundhog and his annual prediction is taken very seriously. There is even a celebrated film about him, starring Bill Murray.
But this year Phil has been usurped by Barack Obama and Ben Bernanke. The President and his bearded Federal Reserve chief emerge daily from their offices like Phil from his hollow tree stump to tell us that ‘green shoots’ are poking through the hard and frozen earth despite obvious signs that winter, economically speaking at least, will be with us for a long time to come. Central to their claims that the worst of the downturn is over is a small amount of evidence that seems to show credit markets easing and banks beginning to lend again. This in turn has helped to arrest the precipitous decline of the housing market, and has spurred a little surge of consumer spending in certain corners of the market.
Many leading economists not only disagree with Obama and Bernanke’s rosy outlook, however; they are making jokes about it. At a recent conference in Philadelphia, Diane Swonk, the chief economist at Mesirow Financial, quipped that there are indeed three areas of the consumer economy where spending has started to increase: ‘Guns, condoms and alcohol.’
Joking aside, Swonk went on to put things in perspective. ‘We’ve gone from a sense of free-fall in the fourth quarter of 2008 to a point where we have pulled the ripcord and the parachute has opened. But we don’t know where we’re going to land, or whether it’s going to be in enemy territory,’ she said.
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