The U.S. economy faced one headwind after another in 2011 – from U.S. budget showdowns, to the eurozone crisis, to ongoing recession fears.
2012 may not be much different. Mark Vitner, Senior Economist at Wells Fargo:
“I think in many ways, 2012 will look just like 2011. The first half of the year, growth is likely to come in below expectations, we’re likely to see fears of recession crop up, particularly if things in Europe get a little dicey. But by mid-year, or certainly by late summer, the data should turn a little bit more positive. Of course, the election will be approaching then, too, so there will be a lot of things on people’s minds. “
Vitner expects housing prices to bottom around the middle of the year and the economy to grow by 2.2%. Beth Ann Bovino, at Standard and Poor’s, expects more modest 1.8% GDP growth, and says that’s well below what’s needed to get all of the unemployed workers back to work:
“You need to see something about 2.3%, 2.4%, just to keep the unemployment rate level as is. I’m expecting the unemployment rate to go up a little bit more, stay at 9% through the year, and then start to come down as the recovery gets a little bit more momentum.”
Yet, Europe remains the single-biggest threat to the overall U.S. economy, according to Nigel Gault at IHS Global Insight:
“The eurozone is the single-biggest threat, not just from the eurozone recession, but from the risk of recession, combined with a eurozone financial crisis that develops into a major global financial crisis. In the worst case, it could be as bad as we saw in 2008, 2009.”
2012 may be the year that the focus turns to debt, both here and abroad – a wildcard that could spell yet more trouble for the already staggering economy.