Forecasting 2012
By Gary S. Meyers and Robert Genetski, Ph.D.
(Forecasts were first presented on Jan. 9, 2012)
Overall, we see an improving economy in the U.S., that could be subject to some surprise economic shocks, such as Iran or a collapse of the Euro, though the latter seems under control for now. And, the elephant in the room is that this is a presidential election year with its own impacts. We will be doing selective quarterly reviews and course corrections as the world turns. Look for:
Armageddon, as predicted by the Mayan calendar—nope.
The economy and indicators.
· Real GDP (w/o inflation) will be stronger and grow 3.00-4.00%. Current GDP (with inflation) to grow 5.00-6.00%.
· CPI stay modest for now at 2.0%-3.00%, varying throughout the year.
· Real GDP (w/o inflation) will be stronger and grow 3.00-4.00%. Current GDP (with inflation) to grow 5.00-6.00%.
· CPI stay modest for now at 2.0%-3.00%, varying throughout the year.
· Home prices will still take a hit during the first half and experience a light recovery of 1.5% during the 2nd half.
· Consumer spending (w/o inflation) should increase by 3.0%-4.0%. Consumer spending (with inflation) up 5.00-6.00%.
· Personal income (w/o inflation) up 3.0%-4.0%. Personal income (with inflation) 5.00-6.00%
· Seasonally Adjusted Unemployment reports will show an improvement to 6.9% by September. Whether or not they are “adjusted” will be another question. A more real number would be down into the high 7% range by yearend.
· Auto industry sales will be 10% higher than 2011, driven by pent-up demand. Scrapped cars will have to be replaced.
· Steel plants are getting heavy orders for the first half that should continue, especially as the auto industry improves. Prices should rise by 3-5% by end of June.
· Heavy industry: Modest growth first half and pick up in second half to 4.5% in 2012.
· Labor union membership will remain level with no significant increases or decreases.
· Pipelines, a second pipeline (the Enterprise Pipeline) will get coverage—running 1200-miles going down the East Coast to the Gulf states.
· Lateral hiring will continue strong as the white-collar job market continues to improve.
· Anti-union legislators in Ohio will be tossed out of office, not so in Wisconsin.
· Indiana will pass stringent anti-union legislation, but no one will care.
· U.S. energy industry will to continue expanding with market forces overcoming EPA restrictions. Energy and energy technology will become an even greater force in U.S., economic expansion.
· Bank lending activity will increase by 10% or more, but it will still be tough for many to get a loans.
· Banking reserves Continued very rapid growth, more than 10%.
· Gasoline prices are going higher to between $3.75 and $4.00 by April. There could be an increase the gasoline tax related taxes, but it will be camouflaged.
· Retail leasing rental rates in general will hold steady as improvements in "A" centers will be offset by "deals" in "B" and "C" centers. Vacancy rates will fall 1.5% to between 9.0 and 10.25%, depending upon the asset class. Improvements will be filled in part as high unemployment entice start-ups.
· Home mortgage rates (30-yr. Fixed) to rise slightly to 4.0-4.5%.
Government policy.
· Fed policy. Expansive for the next two years, unless.
· FDIC policy. Current restrictive policies should ease, as long as the economy improves.
· Fed Funds Rates should remain close to 0.25% for 2012, possibly rising to 0.5% near yearend.
· Federal courts. No judicial nominees getting through—until October budget appropriation time and then maybe only 5 or 6.
· National Labor Relations Board (NLRB). Obama has made three NLRB recess appointments, creating a quorum and giving Democrats firm control of the NLRB, which will continue its very pro labor tear. Expect court challenges.
· Legislation. There will be nothing meaningful passed this year as we will have absolute gridlock.
· Federal Trade Commission. The FTC won’t approve any mergers. (They just stopped the AT&T and T-Mobile merger) and they will be more active in the area of consumer affairs.
· Supreme Court will strike down mandatory provisions of ObamaCare and unfunded mandates for the states.
· EPA actions will continue to harass industry and the recovery, with marginal ecological gains.
· Presidential pick: It will be a very vicious, negative campaign and it could go to the courts. It's too close to call.
· Federal tax policy will see no major changes in 2012—until after the election.
Markets.
· Dow to climb by 15% or more (to 14000) and could be higher
· S&P 500 up to 1,440 or higher.
· NASDQ up 20% or more to 3125 or higher.
· Gold could climb to $1,800, more because of sentiment and uncertainty than fundamentals—and inflation anticipation.
· Silver up by to $33 or more, but should stay below $45.
· Oil is going to $115-$120, with Brent going at least $10 higher. The high prices will be paying for new and replacement energy infrastructure.
· The U.S. dollar will gain strength against other currencies. USD vs. Jap Yen to go to 88.5 or higher. USD vs. Euro should improve to 1.25 or better.
· Treasuries 1st through 3rd quarters:
10-year range:
2.01%
to
2.30%
2-year range:
0.20%
to
0.55%
90-day range:
0.30%
to
0.50%