The US economy expanded at a 2 per cent pace in the third quarter of 2012, led by an increase in consumer spending and a nascent recovery in residential construction investment which jumped over 14 per cent in the third quarter. If sustained, the bounce back in housing could meaningfully spur the US economy over the next year.
However, lingering domestic and global uncertainty are holding back growth and negatively impacting business investment plans and manufacturing output. The biggest obstacle on the horizon for the US economy is dealing with over $700 billion in expiring tax cuts and deep reductions in government spending - the so called "fiscal cliff". Though some kind of deal is likely to be reached before the end of the year, the shape of which will be determined by the fast approaching Presidential election, the impact of the fiscal cliff is still expected to subtract 1-1.5 per cent off of US GDP growth in 2013. The implication for the BC economy is another year of sluggish growth in its largest trading partner, with the upside that resurgent US residential construction will give a welcome boost to the BC forest products sector.