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Economic outlook for 2012 even worse than we thought

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Things are looking worse for the U.S. economy than even three months ago. Since August, forecasters have revised their outlook to predict more gloom than they had expected, according to a new survey of 45 forecasters by the Federal Reserve Bank of Philadelphia. On average, economic forecasters predict real GDP growth of 2.4 percent in 2012, down from 2.6 percent in August, and the 2012 unemployment rate to be 8.8 percent, compared with 8.6 percent in August. Their predictions for 2013 and 2014 are also lower: just 2.7 percent and 3.5 percent, respectively. And that’s still higher than what the Fed itself is projecting, with a growth forecast of 2.4 to 2.7 percent for 2014. Philadelphia Fed

What’s happened in the past three months that’s made everyone so gloomy? The European debt crisis, primarily, which continues to look like it’s going to drag out for months yet. Even if most U.S. banks aren’t directly exposed to the worst of Europe, the impact of Europe on the global economy at large is still likely to hurt us. It’s also worth keeping in mind these forecasts when evaluating the economic plans in the 2012 field: Mitt Romney’s plan to balance the budget, for instance, assumes a decidedly optimistic 4 percent GDP growth rate.

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