Economics expect faster growth as headwinds turn into tailwinds.
Charlie Kline, left, works on a machine affixed with a "Made in the U.S.A." plate at the FesslerUSA apparel manufacture in Orwigsburg, Pa. Regardless of who wins today's presidential election, analysts expect the economic recovery to accelerate.
No matter who wins the election, the economy is on course to enjoy faster growth in the next four years as the headwinds that have held it back turn into tailwinds. Consumers are spending more and saving less after reducing household debt to the lowest since 2003. Home prices are rebounding after falling more than 30 percent from their 2006 highs. And banks are increasing lending after boosting equity capital by more than $300 billion since 2009.
“The die is cast for a much stronger recovery,” said Mark Zandi, chief economist in West Chester, Pa., for Moody’s Analytics Inc. He sees growth this year and next at about 2 percent before doubling to around 4 percent in both 2014 and 2015 as consumption, construction and hiring all pick up.
The big proviso, according to Zandi and Yale University professor Ray Fair, is how the president-elect tackles the task of shrinking the $1.1 trillion federal-budget deficit. The Congressional Budget Office has warned that the United States will suffer a recession if more than $600 billion in scheduled government- spending reductions and tax increases — the so-called fiscal cliff — take effect next year.
“There are a lot of things that are positive going forward for the economy,” Fair said. “Hopefully, we can get a handle on the deficit” without dragging down growth too much.
While concern about the threatened fiscal squeeze may hit gross domestic product this quarter and next, the expansion should pick up strength by the middle of 2013, said Eric Green, a Philadelphia-based fund manager at Penn Capital Management Co. GDP “will surprise to the upside,” said Green, whose firm manages $7.2 billion. “We could grow at a 3 to 4 percent rate over the next couple of years.”