Unfortunately, racetracks, farms, sales companies, and other businesses in the American horse-racing enterprise had best further batten down the hatches for the foreseeable future, given the uncertainty and trepidation about the U. S. and global economies and the most recent predictions for their direction.
A front-page article in today’s Wall Street Journal has this headline: “Central Bankers Worry Economy Still in Peril.” It elaborates: “…the world’s central bankers are concluding that the global economy is still in a precarious position and the policy apparatus is ill-equipped to help. The mood here in the Grand Tetons, where central bankers and private economists from around the world gather each August, was distinctly gloomy.”
Contrast this state of affairs with the upbeat outlook among economists just 10 months ago. For example, the initial Horse Racing Business article for 2011 pertained to the U. S. economy. It read, in part:
”In 2011, the consensus among economists is that Gross Domestic Product will grow by 3 percent, with a bias to the upside, or to about 3.5 percent. GDP is expected to pick up steam as 2011 progresses… A panel of economists polled by the Wall Street Journal in December 2010 put the probability of the U. S. having a double-dip recession at 15 percent.”
So far, the expert forecasts have been far off the mark and the prospects for the economy in the remainder of 2011 and into 2012 have taken a turn for the worst. In the first quarter of 2011, GDP had a pathetic 0.4% gain and in the second quarter GDP increased by a meager 1%.
Current computer modeling by Bank of America Merrill Lynch (released August 24, 2011) places a greater than 80% probability on a double dip recession. The Philadelphia Federal Reserve is predicting a pending recession with an 85.7% probability. Finally, the Thomson Reuters/University of Michigan consumer survey also puts the chances of a recession at 80%. The survey has not been this pessimistic since May 1980.
Of course, organizations like these are not infallible forecasters by any means and have been wrong before, most recently for the first half of 2011. Nonetheless, even if the U. S. does not slip into a technical recession (i.e., two straight quarters of negative growth), the economy is likely at best to be very slow growth for the rest of 2011. Tepid or negative growth will mean a continuation of the high unemployment rate and will continue to be a damper on consumer spending. Housing should also continue in the doldrums.
This means that the downturn in pari-mutuel wagering is likely to persist and perhaps accelerate because consumers will have less money to spend on leisure activities. In fact, it is difficult to construct an economic scenario for the next 12 months that is favorable to discretionary outlays like wagering and buying bloodstock.
Copyright © 2011 Horse Racing Business