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PricewaterhouseCoopers Chairman Says U.S. Economy Recovering

Dennis M. Nally, chairman of PricewaterhouseCoopers International Ltd., said the U.S. economy is recovering and corporate investment and hiring will increase when there is clarity on government plans to tackle deficits. He spoke in an interview in Dubai on March 5.

On the economy:

“The American economy is doing better than most would say it is because typically what a lot of people try to focus on right now is some of the headline issues, the unemployment level, the deficit, the government spending. Those are real issues, no question about it. But when you look at corporate profits, you look at corporate liquidity, when you look at how business is generally doing, it’s not bad, it’s fairly positive and so I think the economy is clearly headed in the right direction. Most would say, growth probably GDP growth would be anywhere between 2.8 and 3.5 percent this year.

‘‘There is this cautionary mindset that exists right now, and I think most CEOs want to see clarity around some of these big issues. You look at the deficit. There are two ways to deal with it right, you cut expenses or you raise revenue. As long as there is no clarity to what is going to be proposed most companies are going to continue to operate in a very conservative, cautionary way, not be aggressive on investments, not be aggressive on hiring because they want to see exactly how these policies are going to be formulated and how that is going to affect the company.”

On private investments:

“What you have actually seen in the U.S. is everyone loves to talk about the large amounts of federal debt and really what you have seen is the aggregate amount of debt in the U.S. economy is about the same today than what it was 18 months ago or two years ago. And all you have done is you have shifted debt from the individuals, the private sector, to the government. The stimulus is slowly coming to an end and the real big next step has to be geared toward bringing some clarity to some of these big issues that we were talking about. And once that happens then I think you do see the private sector having the capacity to continue to invest, continue to add jobs where appropriate. But they are not going to do so until they get this kind of clarity coming on the fiscal policy stand point.

On household debt:

‘‘What most households have done is in effect deleverage themselves. That has come about either through real estate mortgage issues, whether it is consumer debt etc. You have just seen a significant shift in the debt levels of the private sector that has then been picked up by the government sector through the stimulus programs that they have put in place. Debt as a percentage of GDP of the U.S. economy, the position hasn’t changed at all, it’s just that who owns the debt has changed in a very significant way. It’s probably a less risky position today than what it was two years ago when the private sector was owning the debt, when you had the potential for all the defaults and all those kind of things. At least with the federal government owning the debt, most people would say you are not going to see a default.”

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