Regions Bank exec: Consumer cutbacks here to stay

By Michael E. Kanell

The Atlanta Journal-Constitution

The economy has turned a crucial corner out of recession -- and into a world of limits, said the chief economist for one of the Southeast’s largest banks.

The downturn is almost done, but the steady surge of growth that usually marks a recovery will be replaced by anemic growth, rising unemployment and a period of decline in consumer spending, said Robert Allsbrook, economist at Birmingham-based Regions Bank.

As Americans’ inflation-adjusted average income loses ground, standards of living are slipping, he said during a Buckhead talk to clients and company officials Thursday.

“It is declining and it will decline a lot more.”

The current recession, which began at the end of 2007, has been “more than twice as long and almost twice as deep” as the previous two downturns, he said.

Growth this quarter should look good, he said. Companies have cut production, using inventories to meet demand. Now, inventories must be replenished. But that will bring only a short burst of decent growth, he said.

Consumers, who account for most of the economy, are not going to spend enthusiastically as they cope with diminished home values and a hostile job market. The above-average growth that followed the 2001 recession was fueled with borrowing, as the savings rate fell to zero or less.

Business investment is picking up, but the consumer spending can no longer depend on home equity loans and other kinds of easy credit, Allsbrook said. Adjusted for inflation, consumer spending will not be solidly positive until 2011, he said.

“It will be a very unusual recovery,” he said.