We expect the bumpy road to continue in the short-term as a tug of war between improved fundamentals and short-term headwinds continue. Looking further into next year, we see good reasons why the economy should finally be able to reach sustained growth above trend.
A payback from the inventory build-up in Q3, high policy uncertainty and negative effects from Sandy will depress growth in Q4. These factors should ease next year but households will see a significant tax increase, which will weigh on Q1 growth.
From Q2 next year, we expect growth to recover. Fundamentals in the private sector have improved, the housing market should be a significant positive factor and business cautiousness this year has left pent-up demand in investments. Further, oil supply should ensure that the recovery is not derailed by an oil price shock.
We expect the current twist programme to be replaced by unsterilised purchases of treasuries next year, adding more policy easing. We also expect the Fed to move forward with its numerical threshold framework. In terms of inflation, both core and headline inflation should stay below 2% in coming years.
To Read the Entire Report Please Click on the pdf File Below.
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Research US: Tug Of War
Published 12/10/2012, 08:08 AM
Updated 05/14/2017, 06:45 AM
Research US: Tug Of War
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