U.S. economic recovery tenuous if European debt crisis spills over

OTTAWA, July 22 /CNW Telbec/ - The U.S. recovery remains fragile as businesses refrain from hiring and stimulus spending gradually comes to an end, according to The Conference Board of Canada's U.S. Outlook - Summer 2010.

"The recovery is still very uncertain and will remain so until we see stronger employment and income gains," said Kip Beckman, Principal Economist. "Unfortunately, the ongoing debt crisis in Europe has provided employers with another reason to delay the hiring that normally accompanies economic growth."

Real GDP in the United States is forecast to expand by 3.2 per cent in 2010, after falling by 2.4 per cent in 2009. The Conference Board of Canada's forecast assumes that the steps taken by the European Union and the International Monetary Fund will be enough to prevent the financial crisis from spilling over into other countries.

Most of the economic growth in the U.S. is coming from strong investment spending and exports. Companies are flush with cash - a result of healthy earnings and lower debt loads - which has led to a sharp increase in business investment spending. Real spending on equipment is expected to increase by 9.2 per cent this year, compared to a drop of more than 16 per cent in 2009. Following severe declines in both exports and imports in 2009, real exports are expected to rise by close to 11 per cent and real imports are forecast to increase by nine per cent this year.

The weak state of labour markets implies that the unemployment rate is expected to remain above nine per cent until at least the second half of next year.

SOURCE Conference Board of Canada

For further information: For further information: Brent Dowdall, Media Relations, Tel.: 613-526-3090 ext. 448, E-mail: corpcomm@conferenceboard.ca

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