Tuesday, February 16, 2010

Feds Peg Growth at 3% For 2010, 4.3% for 2011, 2012

Federal government forecasters are predicting a gradual economic recovery with overall growth predicted to be about 3 percent this year and 4.3 percent in both 2011 and 2012.

The Council of Economic Advisors' report, released late last week, also predicts that United States exports will increase sharply as the global economy picks up speed, going so far as to predict that the export upswing may mirror the downswing leading into the recession.

The report authors also noted that it is critical for the US to strengthen trade ties with countries in Asia as these markets are likely to be a primary consumers of American goods in the future.

"Some nations with large current account surpluses took steps to increase domestic demand during the crisis, and these efforts must be maintained and expanded if world growth is to rebalance," said the report.

"It is not a given that such a transition will take place. Concerted policy action will be needed, but if saving falls in countries with current account surpluses and spending rises, that should stimulate U.S. exports as well as take pressure off the US consumer as an engine of world growth."

The report also noted that one positive during the global economic crisis has been that most nations have not resorted to protectionism, which has helped to moderate job losses in the US.

Despite this, the report predicts that domestic unemployment will remain at about 10 percent during 2010, falling to 9.2 percent in 2011 and to 8.2 percent in 2012.

One way identified by the White House, and highlighted by the President in his State of the Union address, to increase domestic employment is by doubling US exports within five years. However, the road toward that goal may be uphill, as the report noted that the nominal value of US exports fell by more than $400 billion between their peak in the third quarter of 2008 and the trough of the recession in the second quarter of 2009.

In addition, to the President's export targets, the report also repeated the administration's stated goal of pursuing further free trade agreements – particularly a regional transpac agreement – despite the current Congressional apathy to move forward on three pending bilateral trade agreements.