William B. Cassidy, Senior Editor | Jul 02, 2012 10:50AM EDT
The U.S. may be stuck in a period of slow growth, but its economy is not in imminent danger of sliding back into recession, an Emory University economist says.
U.S. GDP should grow about 2 percent in 2012, according to Jeffrey A. Rosensweig, director of the global perspectives program at the Atlanta-based university.
"Two percent growth is really not very good but at least it means no one really sees us going into recession, even if Italy and Spain do go down," Rosensweig said.
“The world economy and the U.S. have grown for three years,” the economist told executives at the SMC3 Connections 2012 conference in Chicago Friday.
“The leading edge of that growth has been trade,” Rosensweig said.
Slow growth may not feel that much better than recession, he warned. "It takes 3 percent (GDP growth) to make it a good year, to start to reduce unemployment."
The U.S. Department of Commerce reconfirmed June 28 that first quarter GDP growth was limited to 1.9 percent. In the fourth quarter, GDP expanded 3 percent.
Reductions in private industry inventories accounted for some of the GDP drop from the last quarter of 2011, the department said. That was offset, in part, by exports.
U.S. economic growth, slow as it may be, is fueled by manufacturing and by exports, today primarily exports to fast-growing areas of the developing world, Rosensweig said.
U.S. imports and exports will rise 4.7 percent a year for the next 15 years, led by exports to emerging markets, according to a report by HSBC Commercial Banking.
The HSBC Global Connections Trade Forecast, produced with Delta Economics, forecasts growth despite global economic difficulties, notably in Europe.
"What's led the recovery of the U.S. economy is exports of goods," Rosensweig said. “There’s tremendous purchasing power still developing in the emerging world.”
However, a recent fall-off in exports attributed to the European debt crisis and slower growth in Asia is a warning sign of slower growth in the U.S., Rosensweig said.
"We may be getting to a point where because of Europe and Asia, our export growth won't be as strong, and that's stopping the rapid growth of manufacturing."
Although he believes there is a "30 percent chance" the U.S. could fall back into recession, he rejects the Economic Cycle Research Institute's recession call.
ECRI first said a U.S. recession was imminent last September and reconfirmed that call late last year and in recent months as its Weekly Leading Index dropped lower.
"I'm much more optimistic than they are," Rosensweig said at the SMC3 event.
"If you make a call for recession, you've got to get in nine months," he said. "I think in their case, they must have missed the boat and they're doubling down."
Contagion from the economic crisis in Europe is a threat to the global economy and the U.S., he acknowledged, especially if foreign currencies weaken against the dollar.
A stronger dollar would hurt U.S. exports. “That has me worried,” Rosensweig said.
“If things fall apart in Europe, it's anyone’s guess.”
Contact William B. Cassidy at wcassidy@joc.com. Follow him on Twitter at @wbcassidy_joc
