The massive industrial company and economic bellwether says the outlook in 2012 is better than most presume. Specifically, they say there will be no global recession. Some highlights via this morning’s earnings:
- We expect improving world economic growth to increase demand for commodities. Our outlook assumes most commodity prices will increase slightly in 2012 and continue at levels that encourage investment. We expect that copper will average over $4 per pound, Central Appalachian coal about $75 per ton and West Texas Intermediate crude oil about $100 per barrel.
- In the developed economies, capital investment recovered much faster than did overall economies. This better performance occurred primarily because businesses had improved cash flow and better access to credit. In addition, businesses let capital stocks depreciate significantly during the financial crisis of 2008 and 2009. We anticipate business investment will continue to outperform other economic sectors in 2012.
- While U.S. economic activity is improving, the recovery has been slow by historic standards, and unemployment remains high. If economic growth does not accelerate, it may take several years for unemployment to reach pre-financial crisis levels. In our view, this would signal the potential for a prolonged period of continued growth in the United States.
- The Eurozone public debt crisis has been a lingering negative, but it is unlikely to trigger a worldwide recession. The Eurozone will likely have at least two quarters of weak, possibly negative growth, but should begin to improve in the second half of 2012. For 2012, our outlook assumes economic growth for the Eurozone near zero and growth of about half of a percentage point for Europe in total.
- We expect economic growth in Asia/Pacific will exceed 6.5 percent in 2012, about the same as in 2011. Growth should improve in Australia and Indonesia, the result of recent interest rate cuts.
Risks to their outlook:
- In our opinion, the risk of a worldwide recession has diminished significantly over the past quarter, but we remain concerned that central banks, particularly in developed economies, will react to the first signs of better growth by tightening economic policies. Even modest premature tightening could significantly slow economic growth.
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