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Strategist: Economy expected to 'muddle' through 2013

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The U.S. economy is expected to grow next year at a less-than-ideal rate, but that’s not necessarily a bad thing.

That was the message delivered Friday morning by John Augustine, chief investment strategist at Cincinnati-based Fifth Third Bank, who spoke at IBJ’s annual Economic Forecast. (For a recap and discussion of how the winner of the presidential election could affect the economy, see video below.)



Entering 2012, Augustine said the growth of the U.S. economy hinged on the number three: Gasoline prices needed to stay within the $3-per-gallon level, the inflation rate needed to be at or below 3 percent (it was 1.7 percent through August), and gross domestic product needed to grow 3 percent.

GDP growth, at just 1.25 percent, continues to be among the biggest drags on the economy.

So Augustine is scaling back his expectations for next year—to just 2 percent GDP growth—as the economy continues to “muddle,” he said. But that’s OK as long as growth remains above the inflation rate, he said.

“This year, despite the recession in Europe, we’re moving forward, just not as much as we would want,” Augustine said, citing improved housing and unemployment numbers. “However, we’ve still got three months to go, and we do see storm clouds on the horizon.”

High unemployment remains a concern, along with federal spending rates and volatility in the commodity markets, particularly concerning high gasoline prices.

If the U.S. economy relapses into recession, much of the blame will fall on the federal government, Augustine said, for spending much more than it takes in. That’s what parts of Europe are experiencing now.

“We’re literally paralyzed by this,” he said. “The bigger the government spending, the less the economy grows. That’s just the way it is.”

On a brighter note, the stock market is performing relatively well, with the S&P 500 near its all-time high, and corporate earnings and dividend yields are strong, he said. The challenge is getting companies to invest that cash in expansions and new hires to help bring the unemployment rate down.

With the presidential election looming in November, those are keys to a successful administration, Augustine said.

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  1. I think the poster was being sarcastic and only posting or making fun of what is usually posted on here about anything being built in BR or d'town for that matter.

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  3. So disappointed in WIBC. This is the last straw to lose a good local morning program. I used to be able to rely on WIBC to give me good local information, news, weather and traffic on my 45 minute commute.Two incidents when I needed local, accurate information regarding severe weather were the first signs I could not now rely on WIBC. I work weekend 12 hour nights for a downtown hospital. This past winter when we had the worst snowfall in my 50 years of life, I came home on a Sunday morning, went to sleep (because I was to go back in Sunday night for another 12 hour shift), and woke up around 1 p.m. to a house with no electricity. I keep an old battery powered radio around and turned on WIBC to see what was going on with the winter storm and the roads and the power outage. Sigh. Only policital stuff. Not even a break in to update on the winter storm warning. The second weather incident occurred when I was driving home during a severe thunderstorm a few months ago. I had already gotten a call from my husband that a tornado warning was just southwest of where I had been. I turned to WIBC to find out what direction the storm was headed so I could figure out a route home, only to find Rush on the air, and again, no breaking away from this stupidity to give me information. Thank God for my phone, which gave me the warning that I was driving in an area where a tornado was seen. Thanks for nothing WIBC. Good luck to you, Steve! We need more of you and not the politics of hatred that WIBC wants to shove at us. Good thing I have Satellite radio.

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