The U.S. economy will grow 2%-2.3% in 2012. Despite a slowdown from the 3% pace of growth in the final months of last year, the economy will better its lackluster 2011 performance of 1.7%. Although growth started and ended last year relatively strong, it faded badly in the middle. We expect the tempo this year to pick up in the second half of 2012 and stay up through year-end. Still, growth will run shy of the pace needed to significantly lower the unemployment rate.
Consumers are finally opening their wallets after four years of saving more in an effort to restore wealth lost in the housing crash and the 2008 stock market drop. Now, even those with sizable debt are willing to borrow more or dip into savings to buy essentials, including big-ticket items such as cars. But higher energy prices, due mostly to heightened tensions with Iran, will keep consumer spending from rebounding dramatically. It will end 2012 only slightly higher than in 2011.