WASHINGTON, D.C. — With analysts maintaining that subprime
auto lending is surging, the Economic Advisory Committee of the American
Bankers Association recently issued a cautionary assessment about how the U.S.
economy will continue to grow at a moderate pace.

However, the committee thinks there are ongoing downside
risks from Europe and the looming "fiscal cliff."

According to the committee, which includes 12 bank economists
from among the largest banks in North America, inflation-adjusted GDP will
expand by 2.2 percent this year, compared to 1.6 percent in 2011.

"Although economic growth will pick up, downside risks have
become more pronounced," said George Mokrzan, committee chairman and Huntington
Bank chief economist.

"Our consensus forecast is that the economy isn't growing
rapidly enough to push the unemployment rate below 8 percent by year-end,"
Mokrzan projected.

The group sees enough positives to keep the economy
moderately moving forward.

Consumer spending, which represents 70 percent of the
economy, is expected to grow at an annualized rate of 2.4 percent this
year. 

The committee noted household debt service has dropped,
strengthening consumer balance sheets, which could support future spending.

The group also described new-vehicle sales as having a "strong
showing," based on the expectation that sales will exceed 14.5 million units this
year.

The committee also forecasts a mild recovery in the housing
market.

The committee foresees a rebound in real residential
investment spending, growing at a 10.4 percent pace for 2012, but coming off a
low base. 

"However, housing prices are stabilizing at depressed levels,"
committee members stated. "And with record-low mortgage rates, the committee
forecasts a rise in new and existing home sales." 

The bank economists see the economic challenges facing Europe
as a significant risk to the U.S. economy.

Mokrzan emphasized Europe is one of America's largest
trading partners, and weakened finances in that region could risk a global
crisis.   

"European leaders understand the need for strong, collective
action to right the ship," he said.  "If
countries delay or don't take the necessary steps, the situation could escalate
and further threaten the global economy." 

The bank economists also see continuing fiscal challenges as
a major risk to the U.S. economic outlook.

The threat of a "fiscal cliff" may discourage business
expansion, according to the committee.

Mokrzan contends firms may not want to take on new hiring
and spending commitments with major potential tax hikes and federal spending
cuts looming.

"We urge Congress and the administration to generate a
consensus solution to avoid a devastating impact on the economy," he declared.

The committee added that monetary policy will continue to
strongly support economic growth for the foreseeable future.

With inflation holding near 2 percent, the bank economists
believe that the Federal Reserve will maintain the target range for the federal
funds rate between 0 percent and 0.25 percent at least throughout next
year. 

"Low rates are supportive of capital investments by
businesses and enable households to afford homes, cars and other consumer
goods," Mokrzan said. "This will help keep the economic motor running."

The committee forecasts that strong credit growth in 2012
will continue into next year.  Loans to
businesses are expected to grow 11.5 percent this year, while loans to
individuals are expected to increase 7.4 percent. 

"The significant increase in credit growth shows that banks
are doing their part to make loans that will help drive the economic recovery,"
Mokrzan pointed out.  

The members of the 2012 ABA Economic Advisory Committee are:

—EAC Chair George Mokrzan, director of economics, Huntington
Bancorp., Columbus, Ohio
—Scott Anderson, director and senior economist, Wells Fargo & Company,
Minneapolis
—Scott Brown, senior vice president and chief economist, Raymond James and Associates,
St. Petersburg, Fla.
—Sherry Cooper, executive vice president and chief economist, BMO Financial
Group, Toronto
—Robert Dye, senior vice president and chief economist, Comerica Bank, Dallas
—Ethan Harris, co-head of global economics, Bank of America Merrill Lynch, New
York
—Stuart Hoffman, chief economist, The PNC Financial Services Group Inc.,
Pittsburgh
—Peter Hooper, co-head of global economics, Deutsche Bank, New York
—Nathaniel Karp, executive vice president and chief economist, BBVA Compass, Houston
—Bruce Kasman, managing director and chief economist, JP Morgan Chase Inc.,
New York
—Christopher Low, chief economist, First Horizon National Corp's FTN Financial,
New York
—Gregory Miller, SVP and chief economist, SunTrust Bank Inc., Atlanta

For more of the committee's detailed forecast numbers, click
here.