More and better credit will be available to businesses in the next six months, continuing into next year. That's the prediction of the American Bankers Association, which this week issued a forecast for U.S. economic performance predicting growth of 11.5 percent this year in loans to businesses.
The trade group, which represents the $14 trillion industry that has taken much of the blame for the U.S. recession, stated that "the significant increase in credit growth shows that the banks are doing their part to make loans that will help drive the economic recovery." Whether or not you agree, additional forecasts made by the group are mildly encouraging for small business owners.
ABA Economic Advisory Committee chairman George Mokrzan said that consumers will also experience more opportunities for credit. An increase of 7.4 percent in loans to individuals will lead to stronger consumer spending in the second half of this year, he said. The group expects consumer spending, which represents 70 percent of the economy, to grow at an annualized rate of 2.4 percent this year.
And an uptick in home sales, a firming in prices, and housing starts are contributing to a more positive outlook in housing sector, the bankers said. Although housing prices are stabilizing at depressed levels, the committee predicts that record-low mortgage rates will drive a rise in new and existing home sales.
Overall, the group predicts moderate economic growth in 2012, with the inflation-adjusted GDP expanding by 2.2 percent this year, compared to 1.6 percent in 2011.
The 12 committee members—economists representing the largest banks in North America including Wells Fargo, Bank of America Merrill Lynch, PNC Financial Services, JP Morgan Chase, and Deutsche Bank—also agreed that jobs will be created. They predict a slow, steady decline in unemployment to 8 percent this year and to 7.8 percent by mid 2013.
"Although economic growth will pick up, downside risks have become more pronounced," said Mokrzan, who is Director of Economics for Huntington Bancorp. "Our consensus forecast is that the economy isn't growing rapidly enough to push the unemployment rate below 8 percent by year-end."
Those downside risks, he said, are the European sovereign debt crisis and the looming "US fiscal cliff" in 2013. The threat of major potential tax hikes and federal spending cuts could discourage businesses from taking on new hires or committing to spending, the committee said.
"We urge Congress and the administration to generate a consensus solution to avoid a devastating impact on the economy," Mokrzan said.