Washington ? Bullish yet wary, President Barack Obama is highlighting recent economic bright spots while taking care not to overstate a recovery that still has not put millions back to work.

His Republican rivals, in the face of late-arriving economic good news, are making slight adjustments themselves, arguing that Obama’s policies have been a drag on a recovery that could have taken hold sooner.

The competing rhetoric reflects the positive indicators in areas ranging from retail sales and housing to unemployment and falling gas prices. All this has pushed up consumer confidence, a potential barometer of political attitudes. Even Congress and Obama managed to agree on a two-month payroll tax cut extension before leaving Washington for the holidays.

But the economic signs could prove fleeting, as they were in the early spring when economist also detected upticks in activity only to watch them tumble. These new indicators may hold more promise. But a looming European debt crisis is casting a pall.

No one is more aware of that risk than Obama.

“We’ve got an economy that is showing some positive signs; we’ve seen many consecutive months of private sector job growth,” Obama said last week before departing for Christmas in Hawaii. “But it’s not happening as fast as it needs to.”

For Obama, the danger is in promoting an economy that while, slowly recovering, has yet to reflect reality for millions of Americans, or in highlighting positive signs only to see them falter in 2012.

For David Axelrod, the Obama campaign’s top political adviser, visions of a European financial meltdown are what keep him awake at night.

“I think the American economy is gaining strength, I don’t think many would argue that point,” he said. “The imponderable is not about that, it’s really about these externalities and particularly Europe. Especially now that we’ve passed this threshold on the payroll tax cut and assuming that the Republicans in Congress don’t want to rerun that battle, the one big thing on the horizon is Europe.”

Indeed, as the year ends on an up note, leading economists surveyed by The Associated Press expect the economy will grow slightly faster in 2012 — about 2.4 percent compared with the less than 2 percent annual growth that the economy is expected to register by the end of this year.

But underscoring the political challenges facing Obama, these same economists don’t expect unemployment to drop much in a year from November’s 8.6 percent rate.

The public’s economic outlook is improving. An Associated Press-GfK poll in December found that 37 percent of those questioned expect improvement in the economy in the coming year. It was the first time since May that the sentiment significantly outweighed the share saying the economy would get worse in the next year.

This modestly rosy scenario is contingent on keeping any financial disruptions in Europe contained to the other side of the Atlantic. Obama has pressing European leaders, particularly German Chancellor Angela Merkel and French President Nicolas Sarkozy, to act swiftly to avoid a wholesale debt crisis from taking hold. But Obama has few tools other than persuasion with which to influence an outcome.

In a trend the Obama camp is sure to watch, the public is holding Obama more accountable for the economy. The AP-GfK poll found that the percentage who says Obama deserves little or no blame for the economy’s sluggishness has declined from 43 percent in October to 36 percent now.

Republicans are watching, too.

After months of asserting that conditions under Obama have worsened, Republican presidential candidate Mitt Romney this past acknowledged signs of improvement, but gave Obama no credit.