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.
The worsening European crisis, negative reports on the U.S. economy and Congress’ budget cuts have resulted in dramatic market downturns over the past few weeks. Last Monday saw gold fall past $1,700, but as investors chose the metal as their safest bet it rebounded slightly. Silver also shifted in value, falling on Monday, November 21st and rising again on Tuesday. Reviews later showed that stocks have continued their losing streak, and the S&P posted a loss for the sixth day in a row.
David Kostin of Goldman Sachs explained that Congress’ failure to agree on budget cuts has left equity markets and the U.S. credit rating with deep concerns. “Failure to reach an agreement on at least the minimum required savings will reflect poorly on Congress and the S&P 500 could fall by 10% to 1,100%. The wide range of possible outcomes on both the super committee process and the unstable political economy in Europe drives our view that investors should assume the worst while hoping for the best.”
The U.S. Commerce Department reported that GDP grew less than expected- only 2% from July to September. Daniel Clifton, policy strategist with Strategas Research said “We would expect further downgrades, a first downgrade for Moody’s and Fitch and possibly a second downgrade from S&P.”