In terms of what economic growth will look like in 2012, the mainstream is sticking to the “muddling along” economic forecast theory. Just as in 2011, the economic forecast talk is of the U.S. being fine and that we will “muddle along” economically. I’ve been watching markets for 30 years and I’ve never seen economies “muddle along.” Economic growth either expands or contracts. As I’ve been warning readers, the European recession (finally deemed official now by the European Central Bank [ ECB ], I declared it in January of this year) will affect China , which would eventually hit home right here in the U.S. What’s startling is the quickness of the decline in the Chinese economy. It was roughly two months ago that China’s fourth-quarter gross domestic product ( GDP ) came in at 8.9%. The Chinese economy was slowing, but economic forecasts remained in the 8.5%-9.0% range. This week, China’s premier reduced the country’s GDP economic forecast for growth in 2012 to 7.5% from 8.0%. This may not seem like a significant drop, but compared to where we were even a few months ago, the drop is significant. If GDP growth comes in as expected in 2012 at 7.5%, it would be the lowest economic growth experienced in China since 2004. Here are China’s GDP statistics over the last few years, dear reader… (Is there a pattern developing?) 2010 China GDP: 10.4% 2011 China GDP: 9.2% 2012 China GDP: 7.5% (economic forecast by Central Bank of China) The slowdown in China and Europe is affecting other nations in Asia, namely Japan, Singapore, South Korea, and Malaysia. The drop-off in exports reported by each of these countries has been dramatic. The drop-off in economic growth for these countries as a consequence has been dramatic as well. China is being proactive by lowering reserve requirements for its banks (equivalent to an interest-rate cut here in the U.S.). The question now becomes: will this economic slowdown accelerate or will we “muddle along?” Will China’s economic growth rate drop below the 7.5% economic forecast? News this week out of Europe showed how Europe’s services industries contracted more than the economic forecast of economists. It is now in five of the last six months that this index has shown negative economic growth, with an ongoing falloff in new business (source: Markit Economics). So can China’s economic slowdown accelerate? The answer of course is yes, as the economic slowdown in Europe looks to be accelerating. With this backdrop around the world, how can the U.S. possibly escape difficult times ahead? To make matters worse, I’ve been detailing the plight of the average U.S. consumer. With both these headwinds against the …