A report released by TD Economics, an affiliate of TD Bank, noted that despite encouraging signs of progress over the last few months, the U.S. economic recovery remains vulnerable.

“Financial market volatility, Europe’s dual banking and fiscal crises, and a highly polarized U.S. Congress have done little to support confidence in this recovery,” says TD chief economist Craig Alexander. “Yet, despite some massive headwinds, the U.S. economy has proven to be surprisingly resilient.”

The U.S. economy has managed to stage an impressive comeback in the second half of the year after supply chain disruptions and rising oil prices contributed to a lackluster opening. Between July and September, the economy grew at an annualized rate of 2%, driven by resilient consumer spending and a surge in business investment. TD Economics projects growth will accelerate to 3.2% in the closing months of the year, in what could mark the economy’s best quarterly performance since mid-2010.

Although signs of increasing economic growth momentum are plentiful, the economy remains no less vulnerable. “What makes forecasting in this environment so challenging,” says Alexander, “is the degree by which economic outcomes have become so dependent on political decisions.”

Alexander is hopeful that policymakers across the developed world will ultimately act in ways that support the recovery, rather than detract from it. However, he warns that even without the political risks, a relatively deep recession in Europe and spending cuts already passed by Congress will present a significant drag on growth over the next two years.

TD Economics forecasts economic growth to average 1.9% in 2012, which is little different to the performance of 2011. The economy should accelerate to 2.3% in 2013. The unemployment rate is expected to remain elevated at 8.8% by the end of next year, and 8.4% by 2013.

To read the full TD Economics report: click here.