Moody’s Zandi: Euro Crisis, Weak Hiring to Plague US in 2012

Monday, 19 Dec 2011 07:56 AM

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The U.S. economy will grow in 2012 although fallout from the European debt crisis and political bickering in Washington could dampen what little bit of economic expansion will take place, says Mark Zandi, chief economy at Moody's Analytics.

"We expect the U.S. economy to perform a bit better in 2012, but this will depend on policy decisions coming out of Europe and Washington," Zandi says in an outlook statement.

"The Europeans are fighting to keep the euro area together, while U.S. policymakers are struggling to find an appropriate degree of fiscal austerity. While we believe these issues will be resolved in a reasonable way, there is a significant degree of uncertainty associated with this assumption."
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Moody's Analytics is predicting the U.S. economy to grow 2.6 percent in 2012 and hiring will remain sluggish.

"Besides real GDP growth of 2.6 percent, we also expect stubbornly high unemployment, which will lead to low inflation and interest rates," Zandi adds.

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(Getty Images photo)
Many polls and consumer confidence indices show many Americans remain pessimistic over the health of their economy.

That doesn't bode well for recovery, experts say, considering consumer spending accounts for 70 percent of total economic output in the United States.

"Given people's expectations, the outlook going forward does not suggest much upside for consumption," says Jeff Greenberg, an economist at Nomura in New York, according to Reuters.

"A lot of people will be radically different consumers."

Other experts agree that sluggish growth will be the norm in 2012 and although the U.S. will avoid recession, the rest of the world won't be so lucky, which will cloud the horizon here.

"The outlook for the global economy in 2012 is clear, but it isn't pretty: recession in Europe, anemic growth at best in the United States, and a sharp slowdown in China and in most emerging-market economies," New York University economist Nouriel Roubini writes in a recent Project Syndicate column.

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