The U.S. economy will continue to grow at a moderate pace, with ongoing downside risks from Europe and the looming "fiscal cliff," said the American Bankers Association (ABA).
The banking industry group expected the U.S. inflation-adjusted
GDP will expand by 2.2 percent this year, compared to 1.6 percent in
2011.
"Although economic growth will pick up, downside risks have
become more pronounced," George Mokrzan, chairman of ABA's Economic
Advisory Committee, which includes 12 bank economists from Wells
Fargo, Bank of America, JPMorgan Chase, Deutsche Bank and some other
large banks in North America. Mokrzan added "the economy isn't
growing rapidly enough to push the unemployment rate below 8
percent by year-end."
The committee forecast consumer spending, which represents 70
percent of the U.S. economy, will grow at an annualized rate of 2.4
percent this year and auto sales will exceed 14.5 million units this
year, another positive sign.
A mild recovery in the housing market was expected. The panel
foresaw a rebound in real residential investment spending, growing
at a 10.4 percent pace for 2012. However, housing prices were
stabilizing at depressed levels. And with record-low mortgage rates,
the committee forecasts a rise in new and existing home sales.
The economic challenges facing Europe was a "significant risk" to
the U.S. economy, said the bank economists. Europe's crisis was
believed to have a broad negative effect, including falling sales
for U.S. companies, spillover effect through financial market and
credit vacuum as bankers panic.
Another major risk to the U.S. economic outlook was with
continuing fiscal challenges, because firms may not want to take on
new hiring and spending commitments with major potential tax hikes
and federal spending cuts looming.
The committee felt the monetary policy will continue to strongly
support economic growth for the foreseeable future. With inflation
holding near 2 percent, the bank economists believed that the
Federal Reserve will maintain the target range for the federal funds
rate between zero percent and 0.25 percent at least throughout next
year.
As a result, loans to businesses were expected to grow 11.5
percent this year and loans to individuals were likely to increase
7.4 percent, said the ABA, which represents the $14 trillion
banking industry.
