Energy prices remain wild card for US GDP forecasts for 2012


Energy prices, whose volatility throughout 2011 led to breakneck shifts and swings, remain the wild card factor in US economic growth forecasts for 2012.

Speaking at the Barclays Research Global Outlook event in New York last week, Dean Maki, the bank's head of US economic research, who is calling for a 2.5% growth in US GDP into the new year, said drags on the economy from earlier in the year like a surge in retail gasoline prices and impact of the Japanese earthquake have faded.

"The US is back to growth rates prior to those shocks and 2.5% growth should be maintained next year," Maki said, but added that energy prices are a risk to growth in 2012.

"We do see the possibility for a significant rise," Maki said on the sidelines of the event, noting that changes in oil prices would be a "reasonable concern" that could lead to a change in the bank's economic forecast for 2012.

And energy prices aren't the only downside risk for US growth.

The European debt crisis remain a factor, "particularly if a satisfactory resolution is not found and financial markets experience a 2008-style crisis," according to a Barclays report released at the event.

On Friday, oil futures showed lackluster support from news that 17 members of the eurozone and six other countries agreed to a new treaty that would require stricter fiscal and financial discipline in future budgets, that could insulate the euro from a debt crisis. Many investors appeared underwhelmed with the EU summit.The slide in prices continued Monday.

"The European deal did not change anything at a tectonic or constitutional level. Everyone says that it is enough, but we are left wondering if it is," said analyst Peter Beutel of Cameron Hanover.

Similarly, analyst Mike Fitzpatrick of Kilduff Group said: "A character in a movie once opined, 'sometimes, nothing is a real cool hand,' and apparently, EU policymakers feel similarly because the much awaited summit really produced...well, not much."

The larger question of whether the EU treaty is good for energy demand growth remains unclear, said Fitzpatrick.

"Austerity policies can only result in growing unemployment and high and higher public sector debt. This can hardly be expected to generate much aggregate demand from consumers, as the contagion creeps from Europe, to the US and to the export driven economies in the developing world," he said.

Either way, buyer (and sellers) beware, more volatility could be on its way.

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