Dear Friends of Parthenon:

The basic takeaway for the US economy is enjoy the good times of 2010 because 2011 is looking anemic. We are not expecting a “double dip”, but we believe the absence of fiscal stimulus coupled with higher taxes will dampen the recovery from the Great Recession. Europe will languish while the economies of the BRIC countries will flourish.

So, the good news is the world did not crumble. The bad news is we will not see a snap back in the next few years and the world economic order is definitely in flux.

Roger and I will be scheduling another webinar to take place in a few weeks. Details to follow.

Best Regards,

William F. Achtmeyer
Chairman and Managing Partner
The Parthenon Group
+1 617 478 2550 | www.parthenon.com

The US economy has done somewhat better than expected since Parthenon’s December commentary, with real GDP expanding at a 5 1/2% annualized pace in Q4 2009 and probably a 3% to 4% pace in Q1 2010. For all of 2010, we expect GDP growth to bump up to 3.6% versus -2.4% in 2009. Unemployment has peaked and job growth has ensued.

An end to the business panic has led to rebuilding of inventories and renewed growth in world trade. Industrial production in India, China and Brazil is now 15-20% above year-ago levels, meaning that output is well beyond past peak levels.

In Europe, GDP stopped falling in the second half of 2009. However, Europe is stagnating at 1.2% annualized gain in Q3 versus Q2, and a trivial 0.4% gain in Q4, leaving real GDP still 2.3% below Q4 2008. Initial indications for 2010 are also bearish, with EU retail trade volumes down significantly between December and February, a sharp contrast to accelerating retail activity in the US. Thus, EU jobs continue to fall and unemployment to rise.

Differential economic philosophies and political structures are the explanation for the differences. US and Asian policy stimulus came earlier and more powerfully, while European central bankers and politicians remain reluctant to act in unison and with sufficient force. Worse still, the Greek crisis appears to be reinforcing fiscal conservatism at the wrong time and circumstance. Now is not the time for Europe to engage in fiscal restraint. The second decade of the 21st century could resemble the miserable 1980s in Europe if the need for fiscal support is once again ignored.

Unfortunately, new policy developments in the US, such as promised large tax increases in 2011 and 2012 and a reversal of special monetary policy stimulants, are very likely to curb US growth after 2010 rather than support it. A return to recession is not likely but the unemployment rate may stall near 8% for a period.

As we share the facts behind these comments, five themes are addressed in the slides accompanying this mid-April update of the US outlook:

• The “Great Recession” in Historical Perspective
• The Range of Opinion on the Outlook
• Global Comparison
• Facts and Myths: Consumer Behavior
• Challenges to the US Recovery After 2010