U.S. Economy 2012: Will This be a Better Year?

The U.S. economy will slow down in the early months of the year, then accelerate and finish the year having grown nearly 3 percent, according to the country's Chamber of Commerce.

Unfortunately, we think the economy will actually slow down in the early months of 2012, said the U.S. Chamber of Commerce President Thomas Donohue. We expect growth to average 2.5 percent or lower in the first half and then hopefully, depending on the actions of government, to work its way up to 3 percent by the end of this year, he added.

America's most pressing economic challenge is the lack of sufficient growth to create jobs, expand incomes, reduce government deficits, and fund essential programs, he continued.

Analyzing the possibilities of the current year, John Makin, an economist with the American Enterprise Institute (AEI), explained a moderate recovery was possible in 2012. The year before was plagued with enormous uncertainties and market shocks; the absence of such conditions could assist in the recovery of the U.S economy.

There were two major incidents in 2011, which had negative impacts on the U.S economy. First, the Arab Springs uprisings in the Middle East contributed to the sharp rise in oil prices. The second was the tsunami that hit the Japanese coast and resulted in a nuclear disaster, an event that imposed tragic human costs while interrupting supply chains (specifically in the automotive and electronics industries). In addition, the increasingly intense European sovereign debt crisis that started midway through the year put further pressure on the U.S economy.

The trend towards second-half recovery in 2011 could extend into 2012 if the economy is capable of pulling away from drag forces driven by Europe's debt. Also, supply disruptions, which occurred due to the tsunami and nuclear disaster in Japan, are going to continue to diminish. Again, although turbulence in the Middle East will probably continue, its marginal impact on oil prices may be less this year than in the last.

The bottom-line is that 2012 could a better year for global markets and investors and, in the process, encourage the growth of the U.S. economy. However, this could really only happen if the uncertainties currently looming large can be reduced, even modestly so.