Green shoots outnumber weeds as the economy heads into 2010, but the landscape remains fraught with danger signs.

Financial executives and observers expect a gradual recovery throughout 2010, but there are traces of concern about the possibility of higher interest rates and inflation as well as lingering caution about unemployment and the possibility of inflation in the back half of the new year. And retail sales could pick up, but not to prerecessionary levels.

Although the possibility of a double-dip recession can’t be discounted — and is surely on the radar of the Obama administration — most expect a year of slow growth with conditions predicted to be stable at least through the end of the summer.

Christian Menegatti, head of global economic research at Roubini Global Economics, said at a forecast luncheon hosted by the New York Society of Security Analysts earlier this month that he expects the 2010 annual growth rate to be 2.3 percent, a “U-shaped” recovery.

He pointed out that such a recovery might be good overall for the economy, explaining that if growth were to occur too fast, the Federal Reserve might start to tighten rates sooner rather than later. That would have the effect of removing the stimulus too soon and could cause a possible double-dip downturn in which the economy would lapse back into a recession.

Richard Hastings, consumer strategist at Global Hunter Securities, explained, “The conditions are stable through the end of the summer. The risks to the market and the economy won’t emerge until the fourth quarter of 2010.”

He expects the Federal Reserve to start tightening rates toward the end of the year, a move that could guarantee a pick-up in inflation at some point in 2011. That time frame for inflation will coincide with the change in the Treasury yield curve, as well as perhaps increases in taxes due to policy changes and expiration of the tax cuts enacted under the administration of George W. Bush.

“In the meantime, deflation is still the dominant story,” Hastings said.

He doesn’t foresee a bottom yet in the housing market, perhaps not until the end of 2011. That means consumers for the immediate future will likely continue with the deleveraging of their debt-laden balance sheets, just as businesses have endeavored to do.

“I was in Florida over the Christmas holiday. I saw empty restaurants and empty stores,” said Alan Cohen, chairman of Abacus Advisors, an operations turnaround firm.

Cohen, who has worked with firms through many economic cycles, said, “I don’t think it’s ever been worse than this, other than the Great Depression.” The lending environment for retailers and consumers remains difficult, he noted.

And observers are mindful that, until unemployment begins to come under control, the risks to consumer spending remain high.

Laurence C. Leeds Jr., chairman of Buckingham Capital Management, an investment firm that has a high focus in the retail and apparel sectors, said retail and apparel firms are realistic about 2010, earnings and consumer spending.

“They don’t see a boom or a bust, but a gradual improvement in the economy over a period time,” Leeds said.

Most retail and apparel firms did relatively well in 2009 as they bounced back from a brutal 2008 and ended the year intact after learning to lower inventory levels and become more disciplined in their operations. Leeds expects consumers to loosen their purse strings slowly, and doesn’t foresee them “going back into the melancholy condition they were in a year ago.”

Even luxury firms fared decently. “There’s no euphoria anywhere, no boom anywhere. It still is difficult, but many people also have learned how to make pretty good money and beat their earnings forecasts,” the chairman said.

Corey Lipoff, executive vice president of Hilco Merchant Resources, said 2010 will be the “year of living cautiously.”

He doesn’t foresee any pressure by banks on retailers at the moment, but that’s because many have been fine-tuning the lines they want to carry and pulling back on capital expenditures as they curtail expansion plans, all the usual cost-cutting moves lenders look upon favorably in a tough economic environment.

“Retail sales will increase 2 percent to 2.5 percent by the end of the year,” predicted Walter Loeb, the former retail analyst who heads Loeb Associates. He said vendors and retailers will focus on the fall season, culling their assortments and hoping to feature exclusive lines to give consumers an incentive to shop.

And as for inflation, a little bit may be a good thing.

Robin A. Harris, an investment banker and brand consultant who heads up the financial-strategic advisory firm Luxeology, said, “I’m looking forward to seeing some signs of inflation, with the exception of oil. If we see some inflation, it will actually mean that demand is up, for both corporations and individuals. Increasing demand will be the best indication of confidence in the recovery, which we are still all waiting for.”

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