EIU ups US forecast, says eurozone pressures have eased

The Economist Intelligence Unit (EIU) has raised its forecast for economic growth in the US in 2012 to 1.8%, from 1.3% in its monthly global update.
The EIU says that despite weakening external demand from Europe and Asia and continuing stresses at home, the US economy has been resilient.
“Job growth has accelerated, consumer confidence is improving and households are starting to borrow again,” says the sister company of the Economist magazine.
“The housing market also shows tentative signs of recovery, and austerity measures by state and local governments are easing.”
The EIU says that financing pressures in the euro zone have eased in recent weeks, following an injection of nearly EUR 500 bln, in the form of three-year loans, to regional financial institutions from the European Central Bank (ECB).
It notes that additional liquidity may help to prevent a credit crunch in the region, although banks so far appear to have parked the funds rather than lent them into the wider economy.
The interest rates that troubled euro zone sovereigns are paying to borrow are falling, although only at the shorter maturities.
Italy and Spain successfully sold around EUR 22 bln in debt in mid-January at yields well below their most recent auctions.
Banks may be channelling the ECB's loans into sovereign bonds, easing the pressure on yields, says the EIU.
But the euro zone crisis shows no sign of ending. S&P, a credit-rating agency, downgraded the debt of France and eight other euro zone economies including Cyprus in January, weakening both the region's rescue funds and investor sentiment.
The oil price forecast has been raised to an average US$100/barrel in 2012 from US$95/b in the previous forecast, owing to expectations of higher oil consumption growth in 2012 in tandem with the upward revision to the US GDP forecast and signs that China's economy will avoid a hard landing.
The EIU believes that tensions over Iran's nuclear programme, which have heightened in recent weeks, will also push up prices in the first quarter, and could “cause a catastrophic spike if Iran tries to close the Strait of Hormuz and the US responds militarily”.