Economist bullish on US, world economies

By Frank Esposito
Senior Staff Reporter

Published: March 29, 2013 2:02 pm ET
Updated: March 29, 2013 5:35 pm ET

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Topics Materials, Materials Suppliers

HOUSTON — The world economy is heading in the right direction, according to prominent economist Nariman Behravesh.

"Is there room for more optimism?" Behravesh asked at the IHS World Petrochemical Conference, held March 20-21 in Houston. "The answer is a resounding yes."

Behravesh is chief economist for IHS Inc., a consulting giant based in Englewood, Colo. The firm's Houston-based IHS Chemical unit hosted the event.

"There are a lot of bright spots, and the U.S. is one of those bright spots in spite of scare-mongering coming out of Washington," Behravesh said. "A lot of bad things that could have happened in the last 12 months didn't happen.

"There was no fiscal cliff, no Chinese hard landing. The private U.S. economy is ignoring what's going on in Washington."

Around the world, Behravesh — ranked as one of the industry's best economic forecasters by Bloomberg News for three consecutive years (2009-11) — said that northern Europe "is doing well," even if southern Europe is in a deep recession. He identified Africa as the world's fastest or second-fastest growing region and said that economies in India and Brazil are expected to turn around after poor performances in 2012.

Behravesh tagged Chinese economic growth at 8 percent and described Japan as "one of the brightest spots" after three recessions in five years. New leadership in Japan should create growth of 2 percent this year.

He added that the U.S. economy is rebounding in spite of worries about payroll taxes, rising gasoline prices and "a dysfuctional political system."

"The U.S. has self-inflicted problems," said Behravesh, who previously hosted the PBS TV series Inside the Global Economy. "Inside the Beltway, it's a mess."

In spite of this political situation, he said the dynamics of the U.S. economy are good, with growth in both jobs and income, as well as an increase in household net worth, housing starts and home prices.

Balanced growth in China could be affected by a re-inflation of that country's real estate bubble, Behravesh warned. "There are lots of new empty apartments in China, because real estate is one of the few investments a Chinese investor can make."

These conditions should lead to global gross domestic product growth of 3.5 percent in 2013 — a full percentage point ahead of the pace of 2012, he said. In the U.S., automatic spending cuts from the government sequester could reduce U.S. GDP growth from an expected 2.1 percent to 1.6 percent if the cuts stay in place for a full year. Behravesh described those numbers as "not great, but not a recession scenario."

Behravesh credited the "gas and oil revolution" taking place in the U.S. with much of the region's growth.

"There's been a lot of hype [about oil and gas], and it's a little overblown, but it's still a very important development," he said. "It's shifted the global industrial landscape."

The U.S. has had an edge in developing oil and natural gas because of well-developed infrastucture in places like Texas, North Dakota and Pennsylvania. Private ownership of mineral rights also has been crucial, Behravesh said, allowing individuals to negotiate instead of the government. The region also has "lots of independent drillers" with access to capital and good supply chains.

"This is a story about market forces and entrepreneurship," he said. "Not about government intervention. And it happened amidst a push for green energy."

Oil and gas development could create at least 1.7 million upstream jobs and at least 1.5 million downstream ones, Behravesh added. It also could provide U.S. consumers with lower prices on many products.


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Economist bullish on US, world economies

By Frank Esposito
Senior Staff Reporter

Published: March 29, 2013 2:02 pm ET
Updated: March 29, 2013 5:35 pm ET

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