Global Economics and SMB – 2012 US Growth Forecast (Part 2 of 3 Part Series)

2nd of a 3 Part Series

The consensus – the US economy is poised for yet another year of muddling through…   Most private economists forecast growth rates for 2012 to hover around 2%.  That’s little to get excited over, but these forecasts are modestly higher than the 1.7% rate many of the same sources estimate for the official statistics that will close the books  for 2011 on a US economy straining under the collective drag of continuing housing woes, a suboptimal job market and further cuts in government spending.  Below is a graphical depiction of historical quarter-over-quarter growth rate.

According to the Wall Street Journal, the US economy next year will be shaped by four themes:

  • Global weakness, especially in Europe and now emerging in Asia, threatens to undermine US exports – global GDP will drop from ~3% in 2011 to 2.7% in 2012.
  • Housing foreclosures will continue to depress prices, sales and new constructions – 3 to 4MM households are three or more months delinquent
  • Business will continue to add jobs but at a pace that will not put a dent in current level of unemployment – 123K new jobs per month will only keep up with population growth.
  • Government will continue its belt tightening.  Often the “G” of the GDP formula (C+I+G+(X-M)) plays a measurable role during the down economy.  In 2012, it will actually subtract from the total.

Again, what does this mean for small to mid-sized enterprises?  While the recovery has shown surprising amount of muscle in the final months of 2011, it would be foolish to assume the same continued pace in 2012.

Part 1 – Global Economics and SMB – Europe’s Woes

 

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About Richard Lee
Experienced finance and operations professional. Currently partner in five companies, adjunct professor of economics at Columbia College and executive contributor to a small business blog (www.SMBmatters.com); following corporate finance, M&A and management consulting tenures with Orbitz and Diamond Technology Partners; and six years of service with the United States Army.

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