Investment guru and billionaire Warren Buffett has injected a shot of much-needed optimism into the American economy, telling a summit he is a “huge bull” regarding the country’s current economic climate and does not expect a double-dip recession.
The comments come after retail sales data released by the Commerce Department show trade increased by a higher-than-expected 0.4% in August, indicating an economic recovery may be back on schedule.
The Berkshire Hathaway chief executive told a group attending the Montana Economic Development Summit that, “the best is yet to come”.
“We will not have a double-dip recession at all,” Buffett said.
“I see our businesses coming back almost across the board. I’ve seen sentiment turn sour in the last three months or so, generally in the media, but I don’t see that in our businesses. I see we’re employing more people than a month ago, two months ago.”
Speaking through a video link, Buffet reminded the audience that banks are ready to increase their lending, and said entrepreneurs should start looking for finance to start their businesses.
“It’s night and day from a year, year and a half ago,” he said.
“I know Wells Fargo would love to have $50 billion more loans now. Go in and talk to the banker.” Hathaway is the largest shareholder in Wells Fargo, the largest home lender in the US.
The comments come alongside particularly optimistic retail sales. The Commerce Department confirmed sales were up 0.4% in August, in a second consecutive monthly rise above market expectations.
Sales were boosted by an increase in back-to-school supplies, negating a fall in automotive sales of 0.7%. Excluding autos, sales rose by 0.6%.
Several other prominent American entrepreneurs spoke at the conference, echoing his view the American economy is on its way up. Bank of America chief executive Brian Movnihan also said a double-dip is unlikely as “signs of life” begin to appear.
General Electric chief executive Jeffrey Immelt agreed with Buffett, saying entrepreneurs and small businesses should start regaining their confidence and borrow more.
“We need people to be able to feel like they’re going to get loans, the process is going to work and that they understand the rules,” he said. The central challenge, he said, will be to sustain growth.
Disney chief executive Bog Iger also said growth will be a significant hurdle for the troubled economy, saying that “we’re just at the beginning” of a period of change.
But while Buffett remains optimistic about the American economy’s future, Washington remains unconvinced. President Barack Obama last week unveiled billions in new initiatives for small businesses and infrastructure projects in an attempt to keep growth sustained and lower the country’s unemployment rate, currently sitting at 9.6%.
The latest figures from the Commerce Department reveal economic growth grew at an annual pace of 1.6% in the second quarter. A Bloomberg survey of economists predicts growth will slow from 2.7% to 2.5% in 2011.
“We are going to have to keep at it until we get Americans back to work, to extend economic growth and opportunity to all communities across the nation,” treasury secretary Timothy Geithner warned yesterday.
However, OECD secretary-general Angel Gurria told reporters overnight the prospect of a double-dip recession is disappearing, even though the recovery is appearing slow. “We are saying yes there is a slowdown in the recovery, not a double-dip recession, just a slowdown in the recovery,” he said.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
