What is in this article?:
- Economists eye moderate growth for US finances in 2012
- Core inflation
- The U.S. economy appears set on a course of moderate growth with relatively low inflation and steady job growth in 2012.
- Inflation-adjusted GDP growth rose to an annualized pace near the long-term potential of 2.5 percent in the latter half of 2011, and will stay on this path throughout 2012.
The U.S. economy will continue on a course of moderate growth with relatively low inflation and steady job growth in 2012, according to the forecast from the Economic Advisory Committee of the American Bankers Association.
According to the committee, which includes 11 chief economists from the largest banks across the country, inflation-adjusted GDP growth rose to an annualized pace near the long-term potential of 2.5 percent in the latter half of 2011, and will stay on this path throughout 2012.
“Despite severe shocks in recent years, the economy has shown resilience as it continues a gradual march forward," George Mokrzan, committee chairman and Huntington Bank chief economist, said. “The economy is gaining momentum, with strong capital expenditures from businesses and moderate consumer spending setting the stage for sustained growth.”
Although the unemployment rate is expected to remain relatively stable at 8.6 percent, the economy should add 1.6 million payroll jobs – the same number it did in 2011. The committee noted that the job recovery will be prolonged.
“We’re moving from a difficult environment to one that is slowly starting to improve,” Mokrzan said. “The recovery is adding jobs, which will spur consumer spending and increase housing demand. This helps the economic expansion to become more self-sustaining.”
Even though consumer confidence remains weak, the committee expects consumer spending to continue to grow by a 2.0-2.6 percent pace each quarter and by 2.4 percent this year. That rate, along with strong business spending, will keep the economy on a slow, but steady path forward.
"Solid corporate earnings will encourage business investment, with capital equipment leading the way," Mokrzan said. "Additionally, consumers are taking advantage of historically low interest rates and beginning to spend more."
The committee sees signs that housing price declines are easing nationwide, but not in all areas, and there are risks that foreclosures could begin to pick up. Housing sales and starts climbed throughout 2011, and the committee forecasts a gradual recovery throughout 2012.
“Record affordability has made buying a home an attractive proposition, and should help increase demand,” said Mokrzan.
Low interest rates and strengthening credit will support economic growth, according to the committee. For consumer credit, and even more so for business credit, the committee foresees a gradual reduction in delinquencies and a strengthening of credit growth in 2012. The committee forecasts consumer loans will grow 4.1 percent and business loans will grow 7.8 percent in 2012.
“Banks are increasing lending to borrowers, which will continue to support the economic expansion,” Mokrzan said.