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Economist predicts the U.S. will slip into a recession next year

The next recession will be caused by inflationary pressures, rising interest rates and increased health-care costs. Higher taxes and more volatility in Europe also could contribute.
BY JOHN STANCAVAGE Published: August 29, 2012

As for the last sector, housing, Dietrich said modest growth actually will be a good thing, compared with the unsupported boom in the middle of the last decade that culminated in a collapse across some parts of the country.

Gross domestic product, the total of all goods and services produced in the U.S., likely will finish the year with about 2.1 percent growth, Dietrich predicted. That may rise to 2.5 percent in 2013 — still not a barn-burner level — before slipping to 2.4 percent as the recession takes hold, he said.

While the United States has lost some manufacturing to lower-cost countries like China, there have been several offsetting developments, Dietrich said.

“We probably won't get a lot of that production — items like tennis shoes and furniture — back, but during the same time we've gained things like BMW and Toyota plants,” he said.

“The U.S. has the ability to create and innovate. We've come up with things like Facebook, Google and new Apple products. So, it's not always about manufacturing.”

While some domestic observers lament that the U.S. has lost its edge, Dietrich disagreed. It's a matter of perspective, the forecaster said.

“Europeans think we've done a great job coming out of the last recession,” he said.


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