The tourism industry is facing a tough couple of years ahead — but by 2011 solid growth should return.

That is the view of Avery Shenfeld, managing director and chief economist of Canadian Imperial Bank of Commerce (CIBC), who reckons the US economy could start growing again by early next year.

Speaking at the Caribbean Hotel and Tourism Investment Conference at the Fairmont Southampton yesterday, Dr. Shenfeld said the benefits of massive economic stimulus packages in North America — Bermuda's principal tourism market — should start to show later this year.

"The stimulus in the US was about five percent of GDP (gross domestic product) and in Canada it was two percent," Dr. Shenfeld told delegates. "In the second half of this year, we should see some benefits, but for people looking ahead to book vacations, there will be caution. But I would think that by the time of this conference in 2011, all the green lights will be flashing in terms of this industry."

Dr. Avery said he expected to see some modest growth on the US economy by the fourth quarter of this year and growth of around 1.5 percent in 2010.

A massive reduction in household wealth — of some 18 percent in the US and about five percent in Canada — would inevitably impact tourism, he added.

"People are feeling poor in both countries," Dr. Shenfeld said. "We're going back to living the old-fashioned way, where we save up for things, rather than borrow and spend as if there's no tomorrow."

The US was not making the same mistakes as Japan had made during its "lost decade" of the 1990s, Dr. Shenfeld said. The Bank of Japan had taken around five years to reduce its interest rate to one percent — something central banks in the US and the UK managed in the space of one year after their equity peaks.

"Also the US has recognised the need to increase the money supply," Dr. Shenfeld said. "By printing money, it is pumping up lending capacity and recognising that the banking system is hobbled.

"It would be hard to rely on consumer spending to lead the way out of this recession — the ultimate weapon we have is government spending."

Asked by a delegate in a Q&A session what kind of growth he anticipated in 2011, Dr. Shenfeld predicted that the US could see three percent. Talking about quantitative easing — or effectively printing money — Dr. Shenfeld said: "What we did see in Japan was that if you decide too quickly to reverse that, then you can throw yourself back into recession. So what we may see is a W-shaped recovery. Typically one of the years after a recession, we see strong growth and that could be 2011."

Dr. Shenfeld said we were still far from reaching an economic bottom, as sectors like real estate and construction in the US continued to worsen. But he added that there were signs of the economy declining at a slower rate.

Running up large budget deficits and printing money had historically led to inflation — but in the case of the US, Dr. Shenfeld suggested this might not be entirely negative.

"A couple of years of higher inflation in the US would be a positive thing," he said. "It's one way to shrink the relative size of the debt."