2012-09-05 09:34:10 - United States Business Forecast Report Q2 2012 - a new country guide report on companiesandmarkets.com

Despite fairly strong economic activity at the tail end of 2011 and in the early part of 2012, the US economic recovery will remain erratic and weak as households continue to deleverage. However, it would probably require a major external shock such as a collapse of the eurozone to push the US into a full-blown recession.

We see consumer activity, which represents 70% of the economy, continuing to grow at a weak pace, constrained by a weak labour market, elevated savings rates, and stagnant house prices. However, business investment should continue to outperform.

On the monetary front, the Federal Reserve will keep benchmark interest rates at around zero until 2014, with a further round of quantitative easing likely to be implemented in

 

 

2012. This will be supportive of growth, but not a panacea in the face of ongoing private sector deleveraging.

On the fiscal front, we have very low expectations for further stimulus. 2012 is an election year, and the Republican Party majority in the House of Representatives has been obstinate in approving stimulatory policy for fear it might create favour for the incumbent Democratic president, Barack Obama.

Major Forecast Changes

We have raised our forecast for real private consumption growth in 2012 to 2.0% from 1.4%, while bumping up our estimate for 2011 to 2.2% from 2.0%. We see consumption picking up in 2013 to 2.5%, but this would still be below the long-term pre-crisis average of 2.7%.

Key Risks To Outlook

Downside Risks To Growth Forecast: The biggest risk is a collapse of the eurozone, which would hit the US via a financial sector shock and trade channels. A major domestic policy error, especially on the fiscal side, could push the US into recession.

Downside Risks To Long-Term Outlook: The gaping fiscal deficit and rising government debt burden are not an immediate concern, but do pose a risk to macroeconomic stability over a longer horizon.The price of this business forecast report covers 4 quarterly reports on this country. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.

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