Recent events in the financial industry -Lehman Brothers filing for bankruptcy protection, Bank of America buying Merrill Lynch, the government stepping in to shore up AIG -have left many wondering how these events together with other factors dampening the economy could affect individual sectors.
 
Don Norman, an economist for the Manufacturers Alliance/MAPI, tells MDM that’s a good question to be considering but not one that manufacturers and those supplying manufacturers should necessarily panic about, thanks to a solid export market. The reality is that strength in the overall manufacturing sector may be keeping the current economic situation from being a lot worse than it already is. According to Norman, except for companies closely linked to the housing or automotive sectors, manufacturers keep humming along”at a much better rate than the rest of the economy.
 
And even though expectations are that the economic slowdown will worsen through the end of this year -we may even reach the point where we can use the dreaded “recession” word and be technically correct -Norman expects things to start turning around in the second half of 2009, as long as Europe doesn’t follow the U.S. with a significant downturn of its own. He expects the housing market to bottom out and prices to stabilize, providing a better actual value of the mortgages that are pulling so many in the financial sector down. Commodity prices, including those connected to oil, are easing. And exports are expected to stay strong through 2009 (though maybe not as strong as in 2008).
 
And even with the government stepping in to keep the financial market from complete collapse, Norman doesn’t expect a return to heavy-handed regulations by the government -a good thing when it comes to fostering confidence in the markets. There will likely be more oversight but much of the government’s attention will be focused on extricating itself from the financial industry once things have settled down, and on how to prevent itself from having to step in again.