The forces driving the global economy are changing. We expect the US economy to take on a bigger role in the global recovery in 2012, while growth in emerging markets decelerates from the fast pace in 2011.
That may sound like a funny assessment given the endless infighting in Washington over fiscal policy. But the US economy is in better shape than you might think. US manufacturing is relatively strong and exports continue to boom. We’ve also recently seen positive reports on employment, retail sales, capital spending and housing. US consumer spending is starting to pick up, and even the moribund US construction sector is showing signs of life, with the first increase in private construction spending since 2005.
All these things lead me to project that US gross domestic product (GDP) will grow by 3% in 2012—higher than the consensus estimate of 2.2%. That may not sound so fast by historical standards, but it’s the first time that the pace of US economic growth is exceeding the global average since the global economic recovery began in mid-2009.
In emerging markets, growth continues to slow. Real GDP growth has come down from 8.0% in 2010 to an estimated 6.3% this year. This trend is likely to continue through 2012, when we forecast emerging market growth of 5.3%, with slowdowns in Asia, Latin America and central and Eastern Europe. In most cases, growth is moderating and is unlikely to collapse.
Central banks are responding; we expect a string of monetary policy moves in emerging economies. In China, the recent cut in the reserve requirement came earlier than expected. We think that’s a harbinger for an official rate cut within the next three months. Rates in Brazil are also likely to come down.
Of course, the wild card next year is Europe. In our view, the European debt crisis is now acting as a brake on the global economic recovery, but it isn’t likely to trigger a global downturn.
This view assumes that European Union policymakers will agree on a plan to promote and enforce greater fiscal discipline among the member’s countries, which in time would pave the way for the European Central Bank (ECB) to take on a more active role in the debt markets. Recently announced fiscal actions in Italy and the attendant sharp fall in bond yields is a hopeful sign that some progress is being made.
In Europe, we now expect real GDP to contract by 0.5% versus last month’s estimate of a 0.1% decline. This has prompted us to slightly lower our estimates for global economic growth in 2012 to 2.6%, down from last month’s estimate of 2.8%.
The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AllianceBernstein portfolio-management teams.
Joseph G. Carson is Director—Global Economic Research at AllianceBernstein.