Stuart Hoffman: Now, That Was A Close Call

A year ago, when Stuart G. Hoffman opened his copy of BusinessWeek to the 2004 economic survey, he was surprised to find his forecast for growth of 3.8% below the average projection of 4.1%. But the chief economist of PNC Financial Services Group Inc. (PNC ) in Pittsburgh didn't second-guess his expectations. As he saw it, the economy would slow down in the coming year, in part the result of less government stimulus. Hoffman was smart to trust his instincts: His was the most accurate forecast of 2004. Nicholas Perna of Perna Associates LLC in Ridgefield, Conn., came in second.

Hoffman figured higher interest rates and a lack of new tax cuts would slow demand. Plus, he correctly expected some domestic spending would be satisfied by imports, widening the trade deficit and slowing U.S. growth. He also expected the troubles in Iraq and concerns over supply to lift oil prices, though not over $50 a barrel. "I thought $40 would be pretty high," he says. "I never thought it would go as high as it did."

Hoffman, 55, began his career at the Federal Reserve Bank of Atlanta after he earned his master's and doctorate degrees in economics at the University of Cincinnati. After six years down south, he returned to his native Pittsburgh to join the economics team of the old Pittsburgh National Bank, which later grew through mergers and acquisitions into PNC Financial.

In September, 2004, Hoffman was sworn in as vice-president of the National Association for Business Economics after five years on its board. It was his long association with NABE that put Hoffman at the group's annual conference in the Marriott World Trade Center next to the Twin Towers on September 11, 2001. It took four hours before he was reunited with his wife, Jody, a retired teacher, who was in their 19th floor hotel room when the first plane hit. "You don't forget it when you're right in the middle of history," says the longtime reader of Presidential biographies.

For 2005, Hoffman's 3.3% growth forecast is once again a shade below the consensus call of 3.5%. He thinks job growth and lower oil prices will aid consumer spending. But smaller gains in house prices and higher rates will limit home equity loans and refinancings: "Consumers can't use their homes as ATMs anymore."

Luckily, business will take up some slack. "Solid internal cash flows and ample external financings from banks and capital markets [will] help lift capital spending by 6% to 8% next year," he says. With the Fed likely to hike rates all through 2005, he pegs inflation at a tame 2.3%.

Hoffman feels confident about his forecast, but he's even more upbeat about the success of his beloved Pittsburgh Steelers: "We're all very excited here [in Pittsburgh] after years of disappointment." Although it's uncertain how far the Steelers will go this season, Hoffman has found a game plan for winning: Trust your gut, and don't worry what others think.

By Kathleen Madigan in New York

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