Five risks to a US recovery

As the US makes tenuous steps towards sustainable growth, there are five areas which threaten to instigate a recession despite the US private sector proving remarkably resilient.

The US economy grew at 3 per cent annual rate in the fourth quarter, but first half growth is likely to disappoint, renewing upward pressures on unemployment.

Fourth quarter growth was powered by stronger consumer spending – especially on autos, substantial additions to business inventories, and stronger multi-family home construction.

Through most of 2011 gains in consumer spending outpaced incomes; however, from November through January, real consumer spending was flat. In recent months, higher gas prices absorbed significant additions to nominal income created by a somewhat stronger labour market.

Unlike the boom years of the last decade, households will not be able to refinance credit card debt by further mortgaging homes, and consumers simply had to slow down. The notable exception continues to be autos, where an aging fleet helps increase sales, and higher education – much of the recent surge in consumer credit has not been on credit cards but loans to finance autos and higher education.

Forecasts

The economy will register growth at or below 2 per cent the first half of 2012, perhaps picking up the second half of the year to about 2.5 per cent, and tail back to about 2 per cent in 2013.

{{content.question}}

{{ twilioFailed ? 'SMS Code Failed to Send…' : 'SMS Code Sent…' }}

Hi {{ user.FirstName }}

Looks like you've already taken a free trial

Please enter your payment details

We have sent you a code via SMS to {{user.DayPhone}}

please enter this code below to activate your membership

We cannot send you a code via SMS to {{user.DayPhone}}

If you didn't receive SMS code please

SMS code cannot be sent due to: {{ twilioStatus }}

Please select one of the options below:

Looks you are already a member. Please enter your password to proceed

Please untick this box when using a public or shared device


Verify your mobile number to unlock a FREE trial

Please sign up for full access

Updating information

Please wait ...

  • Mastercard
  • Visa
Mastercard

The email address you entered is registered with InvestSMART.

Please login or select "Don't know password"

Please untick this box when using a public or shared device


Register as a new member

(using a different email)

Related Articles