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Despite Ups and Downs, US Economy on Track to Recovery


Economic reports published Tuesday show a mixed picture for the U.S. recovery. Despite steady improvement in the job market, manufacturing orders declined last month and home prices fell.

American consumer confidence is at a 12-month high. Unemployment has fallen to pre-crisis levels and Greek debt is fading into the background - at least for now. But even as rising stock prices fuel confidence in a sustainable recovery - higher gasoline prices threaten to crimp consumer spending.

"I think what's driving this is number one: better than appreciated oil demand growth, that's the scene setter, if you will," said Jan Stuart, head of energy research at Credit Suisse.

Higher prices at the pump mean less disposable income - a setback in an economy driven primarily by consumer spending.

Still, after the worst financial crisis since the Great Depression, economists say a few bumps are to be expected.

"The U.S. economy is naturally a very flexible economy, a very innovative and dynamic economy and you're feeling that," said Uri Dadush, who heads the international economics program at the Carnegie Endowment for International Peace. "But the crisis leaves a heavy legacy. A lot of problems and that's why for example, in the housing sector, etc. - you know you're not seeing the recovery that you would expect."

Despite a decline in foreclosures, home prices fell four percent in December.

And a new report suggests more Americans are choosing to rent until home prices stabilize.

But even with some ups and downs for the world's largest economy, Dadush sees reasons for optimism.

"I have seen the ups and the downs, and the catastrophes and the euphoria and sentiment does change very quickly," he said. "I would focus much more attention on the slowly moving variables, the unemployment rate, the indebtedness of households to judge whether we are moving in the right direction."

The National Association for Business Economics believes the U.S. economy is moving in the right direction. The association's latest survey points to an improving job market and economic growth of about 2.5 percent in 2012.

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