2013 U.S. Economic Forecast: Groundhog Day for the Economy

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The U.S. and western Europe economies are projected to grow in 2013, but not impressively. Image credit: The Conference Board.

If the interminably-slow economic recovery the U.S. experienced in 2012 didn’t surprise you, prepare to not be surprised again for at least one more year.

The Conference Board publishes a monthly index of leading economic indicators designed to serve as a barometer for the future direction of a country’s economy.

The index includes average weekly manufacturing hours, average initial unemployment applications, manufacturer’s orders for goods and materials, supplier delivery speeds, non-defense capital goods spending, new building permits, the S&P 500 index, the M2 money supply, the spread between short and long-term interest rates, and consumer sentiment.

In November, leading economic indicators in the U.S. rose .2%, after a .2% increase in October and .5% in September. These increases have indicated a gradual slowing, although there is nothing structural within the American economy that portends an impending recession unless the looming ‘fiscal cliff‘ strikes at the heart of the recovery with increased taxes on top of forced austerity — just like what’s happening in Europe.

According to the latest estimates by the global research association The Conference Board, the United States will finish 2012 with its GDP growing at a tepid 2.1% rate, below the world’s overall growth rate of 2.5%. Within the subset of what is considered “advanced economies” (the United States, the European Union, Canada, Israel, Iceland, Korea, Australia, Taiwan, Hong Kong, Singapore and New Zealand), however, the U.S. will outperform the region, as the overall growth rate for the peer group is estimated at 1.2%. The group’s overall growth rate is hampered by the recessionary economies of Europe; most notably, those of England, Ireland, Greece, Italy, Spain, Denmark, Romania, and the Netherlands.

Double-dip Recession in Europe

The cause of the latest European recession is sweeping austerity invoked after the global financial meltdown of 2008-09. As governments have reigned in their spending, public budgets have necessitated cuts, hampering overall demand. Consumers have not yet recovered from the after-effects of the financial crisis, so with that sector not yet fully restored and governmental spending simultaneously reduced at the same time, demand has faltered. This combination of factors is a recipe for deflation, increased unemployment, and recession.

This latest downturn, so close to the heels of the Great Recession, is defined as a “double-dip” recession – an uncommon-but-not-unheard-of phenomenon where an economic recovery is cut off in mid-stride and another recession strikes shortly thereafter.

Economy Growth: Emerging Sectors Outpace Europe and the United States

Nations by which The Conference Board terms “emerging and developing countries” include China, India, Russia, developing Asia, central Asia, Latin America, southeast Europe, the Middle East, and Africa. Every single country and sector is on pace to strongly outperform both the U.S. and Europe in 2012, led by China at 7.8%, India at 5.5% and the Middle East at 5.5%.

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