U.S. Economic Recovery Passing the Baton to the Private Sector: TD Economics
TORONTO, June 11 /PRNewswire/ -- After a deep economic recession and stimulus-fueled rebound, it is imperative that the U.S. economy is successful in transitioning toward a sustained private-sector expansion, according to the latest U.S. Quarterly Economic Forecast report from TD Economics.
"While all signs point to the recovery continuing, the path to full health is long and as recent events out of Europe have shown, fraught with perils," write TD's Deputy Chief Economist Beata Caranci and Senior Economist James Marple.
Updating their previous economic forecast from March, the authors note that global risks remain heightened and have been brought to the forefront by the sovereign debt crisis in Europe. The impact on the U.S. economy will be felt directly through trade linkages, as America's competitive position in foreign markets erodes alongside an appreciating greenback. The rise in the dollar could also push domestic consumption towards cheaper imported goods. However, the authors note, "Fortunately, this direct impact is likely to be rather small. The United States is much less reliant on trade as a source of growth than many of its trading partners. Exports make up only 11 percent of GDP and combined with import substitution, the hit to total economic growth is likely to be in the neighborhood of -0.3 percentage points from what it would have been in an environment where global growth continued as previously expected."
However, external influences will offer a modest drag to U.S. economic growth just as the economy absorbs the unwinding of temporary domestic stimulus measures, which will also act to slow the pace of economic growth from that observed in the initial stage of recovery.
The report emphasizes that while the most likely scenario is for a continued but moderate pace of economic expansion of 3.2 percent in 2010 and 2.8 percent in 2011, there are both upside and downside risks to the forecast. On the downside, household balance sheets' vulnerability and risk-aversion in financial markets remain ongoing challenges to credit growth. On the upside, pent-up demand and record-low interest rates could lead to a stronger-than-expected, consumer-led recovery. On balance, private sector job growth will be the key indicator to watch and should show a continued transition toward repairing the damage caused by the Great Recession.
TD Economics provides analysis of global economic performance and forecasting, and is an affiliate of TD Bank, America's Most Convenient Bank®.
The complete findings of the TD Economics report are available online at http://www.td.com/economics/us.jsp under "Regular Publications."
An audio webcast featuring additional commentary from Marple is also available online at https://www.brainshark.com/tdeconomics/vu?pi=zGKzVTTZPz1MWCz0.
SOURCE TD Economics
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