18/07/2012
"BUSINESS PERSPECTIVE OUTLOOK 2012"
Based on the latest issue of 2012 Fiscal Year Budgeting that has been released few weeks ago from US Treasury as well as been approved from US Senate parliament herewith some conclusion regarding the above market influence globally
U.S. economy is expected to grow by 2.1 percent in 2012, 0.3 percentage point higher than its January projection. "The U.S. economy has gained some traction, with growth improving through 2011 and signs of expansion in the job market," "Risks to the outlook are more balanced but still tend to the downside given fiscal uncertainty, weakness in the housing market, and potential spillovers from Europe,". Based global lender acknowledged evident job growth in recent months, but noted wage growth in the United States has been negative in real terms for the past two years and remains weak. "U.S. economic growth is projected at 2.1 percent in 2012 and 2.4 percent in 2013, reflecting ongoing weakness in house prices, pressures to deleverage, and a weak labor market,". Although recent labor market outcomes have been promising, with unemployment falling to 8.2 percent in March, employment in 2012 and 2013 would only see modest increase. The unemployment is projected at 8.2 percent in 2012 and it may edge down to 7.9 percent in 2013.
Financial market spillovers from the euro area to the United states is relatively strong and warned a flare-up of the crisis in the euro area could easily undermine confidence in the U.S. corporate sector and therefore squeeze investment and demand. On the domestic front, uncertainties about fiscal consolidation and the stockpile of foreclosed homes would put a drag on the economic growth. While urging the U.S. government to put public debt on a sustainable track over the medium term, efforts should be made to support near-term recovery.
Moreover, supporting housing market should also be a priority. "The adoption of the administration's proposals on mortgage refinancing would also be a step in the right direction,". Federal Reserve communicates its decisions and policy assumptions, saying they have the potential to bolster the Fed's support for the economy.
The economy might be headed for a stronger growth track, but there are least three potential obstacles to watch for: Europe, China and political gridlock.
First the positive signs, of which there are plenty: the jobs market is looking up, housing sales and construction have been showing recent signs of improvement, business sales and profits are rising, and even many consumers are in better shape today than they were in 2010.
Households have actually made a lot of progress in terms of working down that debt. Credit card companies in December reported the lowest delinquency rates in years.
One of the reasons that I don’t think the risks of a recession is extraordinarily high is that the parts of the economy that normally push us into a recession such as housing, automobile sales and business inventories; they’re all actually still quite depressed. They never actually recovered much from their recessionary levels. The jobs numbers are getting better. Surveys of privately owned business sales show “the numbers are looking good.”
This week’s economic reports might offer fresh clues on whether the recovery really is picking up. The Institute for Supply Management comes out with findings on manufacturing and services-oriented companies. The government releases monthly reports on factory orders, construction and monthly employment.
While all the numbers could point to growth, the U.S. economy faces potentially severe headwinds from Europe. Next year will no doubt be more difficult than 2011. Europe is facing “its harshest test in decades.”
Slower growth in China is another potential negative, while Washington political gridlock and a fierce election campaign might also take a toll. “US political system is getting worse, not better,” US should have short-term fiscal stimulus and long-term deficit reduction and because of the battles in Washington, we seem to be getting the opposite.”
The partisan formula of an incumbent to buy off voters with an easy money injection into the economy, will not work this time. Yes, the dependency voters may cast their ballot for a second Obama term, but the engine of economic growth, namely; small business is slated for a fire sale under the corporatist prototype of the globalist economy.
Implementing constructive government policies that would unleash merchant small business will not happen in 2012 for a very simple reason. The goal of Wall Street and their handpicked political operatives want private independent enterprises to die on the vine. Social discontent grows daily because the public no longer believes that the political class can provide any viable economic future for the average family. Unfortunately, this attitude misses the mark. Government never produces prosperity. Nevertheless, most people who do voter want to trust in their elected officials. Maybe this fact explains why so many Americans refuse to vote anymore.
The break, with the nostalgia, that the next generation will have it better than the previous one is now shared by even the most optimistic romantic. This election cycle forecasts that economic salvation is illusory. Stock markets may rise, but inflation in stable goods is here to stay. Your money buys less so that the banks can speculate. Government policies and fiscal manipulation, by design, results in dire prospects for 2012. Remember this fact when you vote next November.
The first six months of 2012 are going to be a very key time. National governments and big European banks are scheduled to roll over huge mountains of debt. But if they can’t find any takers that could bring the global financial system to a moment of great crisis very quickly."
The businesses that produce and service the everyday functions of society flounder in a sea of uncertainty and a desert of capital illiquidity. Within this context, the only realistic way to examine the prospects for 2012, must factor in the political component. Yet the promoters of the corporatist system build up false hope, while fudging the numbers.
Consumers are finally opening their wallets after four years of saving more in an effort to restore wealth lost in the housing crash and the 2008 stock market drop. Now, even those with sizable debt are willing to borrow more or dip into savings to buy essentials,
including big-ticket items such as cars. But higher energy prices, due mostly to heightened tensions with Iran, will keep consumer spending from rebounding dramatically. It will end 2012 only slightly higher than in 2011.
Also helping to drive growth: Rising job creation. Business investment in new equipment to expand production after several years of working off spare capacity. The easing of fears about a severe financial crisis in Europe (the mild recession there will trim U.S. exports to Europe, but won't decimate them). In addition, a very modest turnaround in the housing industry this year will deliver a small upward push to economic growth after subtracting from it in each of the past few years.
Close to three years after the end of the recession, a strong, sustained recovery is still elusive, however. Growth isn't accelerating as swiftly as it normally does in a recovery, and that's rendering the economy particularly vulnerable to possible shocks, such as war, terrorism and severe natural disasters.
The job market is improving, but the turnaround in 2012 won’t be dramatic. Job creation will be barely enough to lower the unemployment rate -- 8.2% in March -- to around 8% by year-end, consistent with an economy that will grow only modestly.
Barring a major energy shock that stalls economic growth, we expect the U.S. economy to create about 2.2 million jobs this year. That averages out to 185,000 a month, a bit slower than the pace for the first three months of the year, which saw higher-than-expected job creation in January and February and a surprisingly low 120,000 jobs added in March.
Not to worry -- the March pause in job creation won’t last. After an average of 246,000 jobs added per month from December through February, we believe March’s slowdown was an anomaly. New weekly claims for unemployment insurance, a harbinger of shifts in the job market, fell steadily in March to a four-year low and will stay down in 2012. Manufacturing, a key source of job creation in the recovery, remains solid. It created 37,000 additional jobs in March and will generate more in the months ahead. One or even two months of low job creation isn’t unusual, even in recoveries stronger than this one has been.
One reason we don’t expect the unemployment rate to drop much this year is that recent gains have been due to people leaving the workforce, many of them voluntarily and not because of trouble finding a job. That was the story in March, when the total number of people employed and looking for work declined by 164,000. Although the workforce sometimes shrinks because job seekers get discouraged, the count of discouraged workers also dropped sharply in March, indicating that something else was behind the change. Whatever the cause, the unemployment rate may rise a bit at times this year as people rejoin the job hunt.
But it will remain a tough market for job seekers. More than two years after the end of the Great Recession, the number of workers unemployed for more than 27 weeks is 5.3 million, or 42% of the jobless. That share is down recently but much higher than it ever was before 2009.
-.Sebastian Guo.-
