Bank Economists See Gradual Improvement in the U.S. Economy

According to a forecast from the American Bankers Association’s (ABA) Economic Advisory Committee, the U.S. economy will continue on a course of moderate growth with relatively low inflation and steady job growth in 2012.

The committee stated that, although the unemployment rate is expected to remain relatively stable at 8.6 percent, the economy should add 1.6 million payroll jobs – the same number as in 2011. The committee noted job recovery will be prolonged.

The report also noted that, even though consumer confidence remains weak, the committee expects consumer spending to continue to grow by a 2.0-2.6 percent pace each quarter and by 2.4 percent this year. That rate, along with strong business spending, will keep the economy on a slow but steady path forward.

The ABA committee also saw signs that housing price declines are easing nationwide, but not in all areas, and that there are risks that foreclosures could begin to pick up. Housing sales and starts climbed throughout 2011, and the committee forecast a gradual recovery throughout 2012.

Low interest rates and strengthening credit will support economic growth, according to the committee. For consumer and business credit the committee foresees a gradual reduction in delinquencies and a strengthening of credit growth in 2012. The committee also estimated consumer loans will grow 4.1 percent and business loans will grow 7.8 percent in 2012.

Despite the moderately positive outlook, the committee saw several significant negative risks to the U.S. economy. These negatives included the European debt crisis, challenges surrounding U.S. fiscal policy and geopolitical risks.

Source: ACA International