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US teeters on the Fiscal Cliff

America might be a hop skip and a jump away from falling off the fiscal cliff but it isn’t all bad news for the world’s largest economy.

In December business activity in the US experienced growth for the second consecutive month.

After rising from 50.4 in November to 51.6 in December the MNI Chicago Report’s business barometer stood at a four month high.

This latest result also demonstrates a gradual upwards move away from the 50 mark which separates growth from contraction.

A senior economist with Moody’s Analytics commented on the development but maintained a cautious outlook: ‘Business investment is showing signs of stabilizing but it’s still very soft, and I think that’s going to be taking some steam out of manufacturing over the next couple of months. We’re in the midst of a hand-off from manufacturing to housing as the big driver of the U.S. economy.’

Gains in the housing sector were also revealed in another report.

According to the National Association of Realtors, an index of pending home sales achieved 106.4 in November – an increase of 1.7 per cent.

A rebounding housing market could go some way to making up for weaknesses in other sectors of the economy.

However, if US Lawmakers fail to reach a compromise during their December 30th session, an agreement which would allow them to bypass the imminent series of tax hikes and spending cuts, all the progress which has been made towards US economic recovery over the past months could well be lost.