According to a recent survey, the United States’ economy will continue to grow, but at a slow pace. This is due to low consumer spending and minimal business investment in the region.
Gross domestic product is expected to grow at an annual rate of 2.1% in 2013, according to a forecast from the National Association for Business Economics. Last year, it predicted a 2.2% growth rate.
Nayantara Hensel, spokesperson of the NABE Outlook Survey, said:
“The panelists forecast little improvement in consumption growth, significantly reduced growth in investments in nonresidential structures, equipment and software, and reduced growth in corporate profits and industrial production.”
Still, the labor market has revealed definite improvement; non-farm payrolls are averaging at 165.000 jobs per month next year. So far, 2012 has seen an average of 151,000 new jobs per month.
The U.S. housing market will also continue to grow next year, especially in residential construction and home prices.
Ben Bernanke, U.S. Federal Reserve Chairman, recently stated that the Eurozone debt crisis has significantly impacted the United States’ trade and financial markets.
“The European Union accounts for roughly one-fifth of U.S. exports of goods and services. The U.S. exports to Europe over the past few years have underperformed our exports to the rest of the world,” Bernanke testified before the House Committee on Oversight and Government Reform.
“In addition, weaker demand from Europe has slowed growth in other economies, which has also lowered foreign demand for our products,” he said.
The financial markets have also taken a hit, according to Bernanke. Risk of the crisis spreading still lingers, though financial firms and markets have used this time to adjust their strategies and risks throughout the developing situation. European officials also managed to alleviate some of the stresses in the region, improving the global approach and strengthening markets everywhere.
“However, Europe’s financial and economic situation remains difficult, and it is critical that the European leaders follow through on their policy commitments to ensure a lasting stabilization,” Bernanke said.
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CBN News discusses a recent study covering small businesses which revealed that federal regulations do even more harm than people believe. In fact, the regulations cost the nation $1.75 trillion a year. Small businesses lose more than $10,000 per employee by following the federal rules.
According to author Phil Kerpen, “Democracy Denied,” a Washington D.C. think tank called Phoenix Center discovered that “each federal regulator destroys an average of 98 private sector jobs per year.”
He added that “when you talk about spending, it’s often far more costly than just what we spend on the budgets of these agencies because of the reach they have into the private economy and the negative impact that they have.”
U.S. job growth exceeded expectations in January, implying impressive economic growth and possibly lowering the need for additional Federal Reserve actions. Gold prices have fallen as a result.
According to the Labor Department, employers created 243,000 jobs in January, after adding 203,000 last December. A recent Bloomberg News survey predicted an increase of only 140,000 job positions. The U.S. employment rate has fallen to its lowest in three years; 8.3%.
“The growth in the U.S. is much better than expected, and that has damped the expectation of quantitative easing,” said Integrated Brokerage Services LLC’s Frank McGhee. “The market has priced in continued slow growth.”
Precious metals have fallen in value over the past few weeks, however. According to Bloomberg, gold futures for April fell 1.1%, while silver futures slid 1.2%.
Though consumer spending has decreased over the last month or two, American incomes have increased since December, strengthening savings accounts throughout the nation, according to the U.S. government.
On Monday, the government revealed that consumer spending has barely changed since December, despite intense (and sometimes fatal) holiday shopping sprees. In November, consumer spending rose only one tenth of a percentage point. Consumer spending covers 70% of the U.S. economy, and recent trends may be cause for concern.
However, personal incomes have grown by half a percentage point as of December, reaching a year-long high. Many Americans have been forced to pay their bills with their savings over the past few years, and the rise in income has pushed savings rates up by 4%. In addition, figures for the end of 2011 in the hedge fund industry were disappointing, having been described by Kevin Rose and Azam Ahmed as “dismal.”
Considered the world’s greatest economy, the U.S. has been growing slowly. In 2011 it grew a mere 1.7%, while Federal Reserve officials predict 2.7% growth in 2012.
The U.S. economy’s growth is expected to slow somewhat at the start of 2012, following a burst of rapid growth during the fourth quarter of last year. According to the USA TODAY’s survey of economists, the current state will keep unemployment rates at around the same place they are now.
The survey continued, explaining that the economy will grow at approximately a 2.2% annual rate during the first half of the coming year. The government will release reports on fourth-quarter GDP later this week.
Diane Swonk, Mesirow Financial chief economist, explained that the slower growth will result from the fact that last year’s bounce-back won’t be able to maintain itself. She said: “The little improvement we saw was partly catch-up; the retail recovery at Christmas was more hype than reality. Consumer confidence is still at recession levels, just not at depression levels.”
Still, there are some positive sides to the upcoming year. The risk of an additional U.S. recession is decreasing significantly, while the debt crisis in Europe will only affect a quarter of a percentage point in America’s growth this year.
Next week, U.S. central bankers will convene amongst predictions that 2012’s growth will not be sufficient to reduce the nation’s current unemployment rate of 8.5%. Explored options include additional monetary stimulus, as well as having the central bank loosen up on certain markets.
Jeffrey Lacker, President of the Federal Reserve Bank of Richmond, sees no reason to institute either of these measures unless the economy encounters severe inflation or a dramatic growth slump. “I am still where I was a month or two ago when I said I didn’t see a compelling case for further stimulus,” he said. “The record of the last year and a half is that stimulus raised inflation and didn’t do much for growth on a sustained basis. And I think if we did it again, that is what would happen.”
He continued, stating that this year should bring “more modest expectations for monetary policy.”
“My takeaway from 2011 is the lesson that the impediments to more rapid U.S. growth are likely to be deeper and more persistent than we thought a year ago,” Lacker added. “I am expecting only a modest improvement for 2012.”
Brown Advisory’s head of investments Paul Chew recently rocked the financial boat by saying that the EU crisis will have a very minor impact on American businesses this year. He explained that the rising market demand for United States exports will balance any small decrease in European demand.
“A European recession would clearly hurt U.S. exports to Europe, but the U.S. economy us not overly exposed as the EU only represents approximately 20% of the total U.S. export market,” Chew said.
He went on to explain that S&P 500 gains are currently increasing beyond historical averages, in comparison to the more sluggish GDP. The earnings are also reducing new hires and preserving tight cost restraints. GDP has jumped a mere 1.4%, while S&P 500 earnings have reached 15%.
Last year’s trends, namely volatility and thematic investing, do not interest Chew as much for the upcoming year, as he sees equity valuations as “relatively compelling.”
In contrast to many struggling industries, the auto market has managed to dramatically increase its sales, jobs and product innovations thanks to better quality and bottled consumer demand.
Many potential car purchasers have been hesitant due to the recession, but showrooms are filling up again now that owned U.S. vehicles are more than ten years old, on average. According to experts, the volatile economy has also encouraged car buyers to feel more comfortable with large purchases.
“And that’s a big behavioral change from what we saw in ’08 and ’09. That’s good for the industry,” said Jesse Toprak of TrueCar.com.
Toprak added that vehicles sales are likely to reach $12.8 million this year, seeing as last year around 11.8 million cars and trucks were sold across the nation, to both businesses and private customers. Before the recession, more than 16 million vehicles were sold every year. Still, the slow but steady recovery of the industry has boosted U.S. economy, and especially the Great Lakes and Rust Belt regions.
According to Andrew Pease of Russell Investment Group, “The U.S. economy is in better shape than Europe and that’s positive.” Pease is a Sydney-based senior investment strategist for the firm’s Asia-Pacific region. “Given the huge clouds hanging over the global markets from Europe and uncertainties in the Chinese property market, it’s very hard to be optimistic at this stage. Investors are also pricing in increased geopolitical risks.”
Still, as optimism towards the U.S. economy heightens, Asian stocks rise as well. Asia’s determined growth has also lessens concerns regarding the region’s real estate industry.
The MSCI Asia Pacific Index increased 0.14 point, or 0.1%, to 110.54 in Tokyo. Japan’s Nikkei 225 Stock Average also gained 0.5%, and South Korea’s Kospi Index rose 0.9%.