WASHINGTON The U.S. economy continues to face a number of major obstacles, from regulatory overreach to a swelling trade deficit with China, but there also exist numerous "reasons for optimism," according to Peter Morici, a professor at the University of Marylands Robert H. Smith School of Business.
"These continue to be very, very difficult times. I dont have to tell you that; you deal with it every day. We have been through a terrible recession, and youve heard that over and over again from this administration and the last," he told attendees at the Steel Manufacturers Associations annual members conference in Washington.
"(But) even in this context, I want to say there is remarkable reason for optimism about the American economy and the American people," he said.
Moricis optimism about the U.S. economy is based on several factors, including the shale gas revolution, the repricing of U.S. labor, a strong higher education system, the rapid pace of innovation and a revival of the countrys manufacturing sector. "We still have the most productive manufacturing sector in the world," he said.
At the same time, a number of obstacles to growth remain. Among them are the European debt crisis, regulatory and tax burdens, the trade deficit with China and growing Social Security and state pension obligations, he said.
"The state pension problems are a festering problem just like Greek debt," Morici said.
As a result, Morici forecasts some midterm growth in the U.S. economy, albeit not to the degree most steelmakers would hope. He expects gross domestic product (GDP) to rise 2 percent and 2.3 percent in 2013 and 2014, respectively, little changed from the 2.2-percent growth rate seen in 2012.
On a quarterly basis, this quarter looks likely to be the slowest of the year. Morici expects GDP growth of just 1.8 percent, down from 2.5-percent growth in the first quarter.
"The spring swoon is upon us," he said, predicting a stronger third and fourth quarter, with growth rates pegged at 2.3 percent and 2.1 percent, respectively.
SMA president Thomas A. Danjczek has previously said that the industry needs about 3-percent GDP growth to maintain steel output at normal levels (amm.com, March 4).
When asked by Danjczek whether the U.S. economy could be gearing up for another recession, Morici conceded that "economists are terrible at calling recessions" but said the odds were likely less than 50 percent.
"I think the odds of a recession in Germany are much higher," he said.