Is the US Economy Poised for a Turnaround?
If economists and forex professionals are to be believed, they are of the view that the US economy is poised to grow at 2.4% in 2012, up from the sub 2% growth this year, provided the Euro crisis does not drag the US economy down. Unfortunately, this is not robust enough to generate employment as required and the unemployment rate is expected to remain around 8.5%. The experts who provided this guidance also believe that if the Euro crisis is to get messy, it could pull the US economy and forex trading market down into a double dip. From their statements, it appears that the economists have hedged their position by stating that the economy could do well or it may not do well. Its any ones guess that the economy could either do well or not do well.
Notwithstanding the forecast by the economists according to which things could go either ways, the US economy clocked favorable gains in the yearend, making for New Year cheer to set in. Besides the consumer confidence, which swung up in December, the US economy has managed to create nearly a 100,000 jobs in the last five months and the number of people applying for unemployment benefits has also dropped to its lowest since April 2008. However, home prices have not displayed a very positive trend and have remained subdued in most parts of the nation.
The consistent improvement in the labor markets appear to have had the impact of providing a boost to the consumer confidence, which in reached an eight month high in December. The boost in consumer confidence as opposed to consumer spending suggests that it may not just be related to Christmas and New Year spending, but is actually based on improved labor market conditions, which imparts a sense of confidence to the consumer about the improvement in economic conditions. The marked improvement in consumer sentiment is well reflected in the consumer confidence index prepared by the Conference Board. It rose from 55.2 in November to 64.5 in December, beating expectations of economists who had projected it to rise to a reading of 58.3. However the improved consumer sentiment is yet to percolate down to the real estate market, with the S&P Case Schiller Index suggesting that home prices fell 1.2% in October on an unadjusted basis. But a gradual turnaround in the housing market may be in the offing, with demand for homes showing sign of growth in the recent months.
A drag on the US economy may come from the debt ridden Euro zone, with nations in the Euro Union being forced to cut spending in order to manage their debts. If a nation like Italy defaults on its debt obligations, a few banks may have to wrap up business. These untoward developments can have some impact on the US economy and become a drag on its growth potential. Unfortunately, the US is no better off as far as its level of public debt is concerned. The US is close to hitting its public debt ceiling after which either the government has to stop spending or raise the debt ceiling for making further expenditures. The debt limit ceiling, which is presently at $15.2 trillion, will need to move up to around $16.4 trillion for the US government to meet its expenses. The ongoing Euro zone crisis may have a lesson that the US should learn and devise ways to contain its debt before it goes the Euro zone way as well.
All said and done, the US economy seems to be well poised to enter a better year ahead and display improved growth trends along with gains on the employment front so that a sustainable cycle of growth is achieved.
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