Forecasters: U.S. economy to grow modestly in 2012 led by business spending

The U.S. economy will grow in 2012 with an unlikely chance of another recession or high inflation, a group of forecasters with the National Association for Business Economics said in a report released just as the holiday shopping season kicks into gear.

The 49 professional forecasters who took part in the November report predict the nation’s inflation-adjusted gross domestic product, or real GDP, will grow by 2.5 percent for the fourth quarter of 2011 and by 2.4 percent for the full year of 2012. In November 2010, the same group had predicted a 2011 growth rate of 2.6 percent.

Retailers should get a good sentiment from consumers starting Friday, Nov. 25, with the start of holiday shopping season, but despite recent sales upticks in September and October, the NABE forecasters predict, however, that overall consumer spending will increase by just 2.1 percent in 2012, which is the same annual increase they predict for 2011.

“While still positive, this is well below the historical norm of 2.8 percent and suggests a tepid recovery,” the forecasters said.

The bright spot for the economy in 2012 will continue to be business spending, which is expected to finish 2011 up 10.5 percent and is predicted to rise another 8 percent in 2012, according to the forecasters.

“Twenty-four percent of respondents report the need of businesses to upgrade, replace, or expand plant, equipment, and software, and this will be a major factor in providing support for the economic recovery over the next two years,” forecasters said in the report.

Employment and housing sales are expected to continue their recovery, albeit at a slow pace. The forecasters predict the unemployment rate to decline from 9.1. percent to 8.7 percent in 2012.

The association of economists predicts continued inflation to remain at bay, with an expected 3.4-percent rise in the Consumer Price index for the fourth quarter 2011, but only a 2-percent rise in the CPI forecast for 2012.

Overall, “uncertainty regarding future economic policies” is the major impediment to stronger economic performance, the forecasters said.

The report gives a broad national outlook. On an industry level, retailers continue to tell SNEWS they are cautiously optimistic heading into the holiday season with some data suggesting consumers, outdoor in particular, are buying and spending more.

— David Clucas