Economic Outlook: Uncertainty vs. Modest Gains
Europe’s financial crisis continues to impact the overall economy, the U.S. is
less dependent on exports than other developed economies and appears to riding
out the global economic storm relatively well. Real gross domestic product is
expected to rise an estimated 2.0 percent pace in 2012 and 2013, although
uncertainty surrounding GDP growth prospects remain. In addition, a number of
other unknown factors may have an impact on future growth. The Bush-era tax
cuts and temporary extension of the 2 percent Social Security tax cut are set
to expire at the end of the year, the onset of new taxes associated with the
Affordable Care Act will kick in on Jan. 1, 2013, and significant budget cuts may
have major impacts on the defense and healthcare sectors.
However, the most likely outcome is that Congress will extend
most, if not all, current tax breaks and forestall harsh spending cuts, despite
the prospects of another credit rating downgrade. While the nation’s fiscal
prospects remain bleak, there are still plenty of reasons to be optimistic
about the U.S. economy. Current U.S. economic improvements are more broadly
based and fundamentally stronger than at any time since the recession ended.
Nearly every part of the country has improved during the past year and the
housing sector now appears to be in the early stages of a sustained recovery. In
fact, a few industries are booming, most notably the technology sector. The
energy boom also remains in full swing, although the sharp pull back in natural
gas prices has cut into exploration and production activity in that sector.
Moreover, lower energy prices and the increased certainty of energy supplies
has led to resurgence in the nation’s factory sector, with many industries
moving production back to the U.S. Agriculture also continues to perform well.
more on the midyear outlook for commercial real estate, read "Market Momentum."