Economy Will Begin To Look Brighter During Second Half of 2012- Says Edmund Rome
The U.S. economy will grow about 2.3% this year, an improvement from 2011 but well below the rate needed to make much of a dent in the unemployment rate.
Some forces that hindered growth last year will ease. In Europe, a mild recession should end in the second half of the year and fears of a financial crisis there should be lower overall, though moments of drama are likely. And the U.S. housing market, a negative for growth last year, should bottom out and may even become a small plus.
Still, a strong, sustained expansion will remain elusive. Growth isn't accelerating as swiftly as usual after the deep recession, leaving the economy vulnerable to possible shocks such as war, terrorism or severe natural disasters. Election-year uncertainty about tax rates, government spending and the federal deficit will also serve as a brake, though most of the issues are likely to be resolved, at least for the short term, in December.
Growth slowed this spring, to a 2.2% annual pace in the first quarter, from 3% in the last three months of 2011. But we don't expect a repeat of last summer, when it nearly halted and ended up rising only 1.7% for the year. We see a steadier tempo this time, with a slight pickup in the second half of 2012.
Edmund Rome's Overall Economic Outlook
GDP: Growth of about 2.3% in 2012, up from 1.7% in 2011
Interest rates: Little or no increase in 2012
Inflation: 2% in 2012 despite a temporary energy bump
Business spending: Growth of about 6% in 2012
Retail sales: 6% growth in 2012, down from 7.4% in 2011
Trade deficit: Rising to $620 billion in 2012, up 11% from 2011
Simon Hayes, one of the Senior Research Analysts at Edmund Rome, who headed this particular research, said last week "Consumer confidence is up and consumers are opening their wallets after four years of saving more to restore wealth lost in the housing crash and the 2008 drop in the stock market.
"Solid corporate profits are exceeding expectations so far this year and will help boost confidence of business managers, encouraging more hiring and investment."