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'The State of the Economy'

By Jonathan Newell, ITR Economics

As elected officials and political candidates wax eloquent about their plans to restore the economy and 'put America back on track,' we would like to take the opportunity to provide our own evaluation of the state of the economy.

It can be a bit challenging to believe that 2012 will be better than 2011.

The past year's headlines screaming "Double-dip Recession!" or "European collapse imminent!" distracted many from the steady stream of positive economic news. Consider the facts: We enter 2012 with US GDP is at an all-time high; retail sales for the past year showed solid gains; and employment is on the way up.

Our view on the state of the economy in 2012 is decidedly positive. We expect to see further GDP and U.S. industrial production growth throughout the year.

The employment situation will improve but still remain stubbornly high.

Look for business-to-business activity to remain strong in 2012, albeit at a less vigorous pace. Anticipate increased lending activity and a rise in the stock market. Even the housing and nonresidential construction markets will make a modest recovery.

Make no mistake; there will still be challenges ahead. Many U.S. firms and businesses are growing but have not seen activity return to pre-recession levels. Other factors such as further foreclosure activity, deeper government budget cuts and the stagnating growth in other global economies will continue to weigh heavily on the U.S. economy.

We expect the EU to stabilize, but the debt issue will continue to haunt them throughout the year. China will face challenges in its housing and labor sectors, and Japan will continue to face its long-term economic problems. Yet countries such as Canada and Mexico are set to join the US in enjoying business cycle rise in 2012 - a positive sign for the state of the economy in 2012.

Keep a close eye on U.S. and world events in 2012, but do not be overcome by the naysayers. Too often dire headlines and inflammatory campaign rhetoric can cloud our picture of the economic present and future. Ignore the hype and focus on the facts.

The results for 2011 were positive.

Be prepared to take advantage of the opportunities 2012 will offer.

TAGS: The Economy
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