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Manufacturing Analyst: U.S. Can Grow 3% In 2012 If Issues Addressed Coherently
Dec 29, 2011
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The U.S. could grow its economy 3% in 2012 if it addresses "in a coherent manner... four key issues that impact the economy, according to Dr. Chris Kuehl, economic analyst for the Fabricators & Manufacturers Association, International (FMA).

Role of Politicians. "The role of political players may be the most pressing issue of all," said Kuehl. "The world's central banks have been trying to carry out the economic rescue on their own for more than three years. They have done all they can with interest rates, quantitative easing, and the like. They desperately need fiscal partners that are nowhere to be found."

He noted that politicians are simultaneously trying to stimulate the economy and address debt and deficit. "The problem is that fixing one makes the other worse," he said. "To get out of a recession, a government lowers taxes and increases spending. To get out of debt, it raises taxes and cuts spending. Rather than make a choice, the leaders in Europe and the U.S. try to do both simultaneously and the whole system stalls."

Employment. The employment problem is what most people care most about, but many challenges make recovery in this area difficult. Workers don't have the skills needed to get jobs; workers can't get to where the jobs are, largely because the housing situation makes relocation difficult; and companies that are investing " would rather invest in machines than people."

Consumer Behavior. U.S. consumers who were "dissaving" as recently as 2006 are now saving at a rate of 3.2%, Kuehl said, and most of this frugality is voluntary. He expects behavior to return to "normal" - but that means the "normal" consumer of the 1980s and the 1990s, and "not the crazed consumer of the last decade gobbling up every tiny luxury he could find."

Global Economic Strain. "The adage used to be, "When the U.S. sneezes, the world catches cold." Now it seems when the world catches cold, the U.S. gets pneumonia," Kuehl observed. He notes that the U.S. has been affected by the crisis in Europe. The earthquake in Japan disrupted supply chains and cost the U.S. 1% of GDP growth. He noted that the U.S. is more of an export nation because the dollar has weakened "generally a good thing, he said, but it makes the U.S. more sensitive to the economies of other countries.

If Not Addressed.... If not addressed, Kuehl said, "the U.S. will wallow in the 1 to 1.5% territory - with all that implies." He adds that permanent changes in those four areas "will have a significant long-term impact that extends beyond 2012."

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