Image Source: Flickr

Image Source: Flickr

The American economy is now strong enough to resist Middle East chaos and the Japanese nuclear crisis. Only a big rise in the price of oil could hinder the swift recovery now. That’s according to leading economists who are increasingly positive in a recovery that is nearly two years old. Economist expects the economy to grow faster every quarter this year.

The reason why economist think like that is solely because they predict the American will shop and spend more freely in the coming months. Higher stock prices have made people wealthier. And a cut in the Social Security payroll tax is giving most households an extra $1,000 to $2,000 this year. American businesses , exports and corporate spending, which have helped drive the recovery, are also expected to remain strong.

According to the economist , The one factor that could make a second recession a possibility would be a jump in oil prices to $150 a barrel. Oil trades at about $112 a barrel now. The record high, set in the summer of 2008, is about $147 a barrel. The oil has risen almost $40 a barrel since Labor Day, analysts think it would take something extraordinary to drive the price all the way to a new record — either supply disruptions because of a new front in the Mideast turbulence or action by the Federal Reserve that take down the value of the dollar.

Economists think gas prices, now averaging $3.87 a gallon and rising every day, will stabilize by summer and drop to about $3.50 by fall. Americans are spending more on furniture, cars and electronics. Apple Inc.’s earnings, for example, nearly doubled in its most recent quarter, helped by record sales of iPhones and the popular iPad.

And businesses whether small or large are buying more computers and other equipment. Last week, Intel Corp., the world’s biggest semiconductor businesses,said its quarterly profit rose 29 percent. Corporate demand for PCs and the backroom hardware that powers computer data centers fueled orders for Intel chips. And Honeywell said its quarterly profit jumped 40 percent because of more stipulate for its industrial products.

Amidst the forecast of economist is,

  • The economy will grow at a 3.2 percent annual rate in this quarter, then 3.4 percent from July through September and 3.5 percent from October to December. That would be stronger than the expected 2.2 percent pace for the first quarter.
  • Employers will hire more. The unemployment rate, now 8.8 percent, will drop to 8.4 percent by December. That’s more positive than the economists’ view three months ago, when they could foresee that unemployment would be 8.9 percent by year’s end. The economists think employers will create 2.1 million jobs this year, more than double last year’s 940,000.
  • Average hourly pay, which has not increased fast enough over the past year to keep up with price rises, will rise. A majority of economists think pay will time and again exceed price rises beginning next year at the most recent.
  • Customer spending will grow 2.8 percent this year. That’s a bit weaker than economists forecasted three months ago. But it’s more than last year’s 1.7 percent increase, when many Americans were still feeling the effects of the recession. The downturn wiped out $7 trillion in wealth and eliminated 7.5 million jobs.
  • Inflation will come in at 2.8 percent this year, higher than predicted three months ago, mainly because of energy and food costs . But 2.8 percent would still be lower than the average 3.2 percent inflation over the past 30 years. Last year, it was 1.5 percent.

The brighter forecasts come as U.S. businesses are exporting more planes, industrial machinery, coal and other goods. Solid demand from customers at home and overseas has refreshed U.S. factories. Factory production grew more than four times as speedy as the overall economy likely did in the January-to-March quarter. The government will estimate first-quarter growth on Thursday. However, depressed home prices and sales in many parts of the country are pondering on the economy.