Another Ho-Hum Year for the Economy Likely in 2013

January 4, 2013

For the third year in a row, economists are only slightly more optimistic about the prospects for economic growth and hiring, says McClatchy.

  • The Federal Reserve expected growth between 2.3 percent to 3 percent in its December 12 New Year forecast.
  • However, it now expects 2012 to close with annual growth no better than 1.8 percent.

Several factors, including ongoing debt problems in Europe, unsteady growth in developing nations and political uncertainty in the United States, all add to the cautious optimism about the economy. In addition, many lawmakers have expressed interest in revamping the tax code, which may add to the uncertainty.

As a result, many individuals and businesses have sidelined investments. In addition, many companies have halted hiring new employees.

There is some good news. Many economists expect 2013 to begin with modest growth but then accelerate as the year ends. Furthermore, stocks are likely to go up even if there is slow growth.

  • Through December 27, the Dow was up 7.2 percent for 2012.
  • Additionally, the S&P 500 was up 12.8 percent.
  • In general, stocks should return 9 percent to 16 percent on investment.

In addition, the housing market is also projected to perform well this year. There have been gains in new and existing homes across several regions in the country. And if the housing market performs well, the overall U.S. economy will see above-trend growth.

Global equity markets will continue to perform as they have in 2013. The biggest dangers in the following year are potential geopolitical conflicts because of the impact they can have on U.S. corporations. For example, rising Middle East tensions and conflicts in the South China Sea can impact trade and production of many vital goods and services.

Source: Kevin G. Hall, "Another Ho-Hum Year for the Economy Likely in 2013," McClatchy, December 31, 2012.

 

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