U.S. economy to grow faster in 2012 but Europe debt crisis a threat
The U.S. economy is set grow faster next year as long as it is not impacted by volatility in Europe due to the sovereign debt crisis.
December 28, 2011
The U.S. economy is set grow faster next year as long as it is not impacted by volatility in Europe due to the sovereign debt crisis.
However, the unemployment rate will hardly budge from its current 8.6 percent by the time President Obama runs for re-election in November 2012, according to an Associated Press survey of leading economists.
The American economy will grow 2.4 percent next year compared to about 2 percent or less this year, was the consensus of more than 30 private, corporate and academic economists.
The U.S. economy has created at least 100,000 new jobs for five straight months, the longest such run since 2006. Meanwhile, the number of people applying for unemployment benefits has dropped to the lowest level since April 2008.
Dean Maki, chief U.S. economist at Barclays Capital, says the U.S. economy remains susceptible to an outside shock. A big threat is the risk that Europe's debt crisis will trigger a worldwide credit freeze like the one that hit Wall Street in late 2008.
Beyond Europe, troubles in other areas could also upset the U.S. economy next year, including Congressional gridlock before the 2012 elections, unforeseen global events, such as this year's upheavals in the Middle East, and rising nuclear tensions with Iran.
The economists predict the European economy will decline by 0.5 percent in 2011 and fall into a recession due to countries with large-scale debts hacking back spending and a reduction in lending by banks.
Among the biggest worries is that a major country such as Italy will default on its debt. That could spark a credit crunch like the one that followed the 2008 failure of Lehman Bros.
