Deutsche Bank economist Joe LaVorgna thinks his Wall Street peers are being far too optimistic about 2016's growth prospects.
Though the U.S. limped into the end of 2015 with growth likely to be barely positive, and the early year data mixed at best, the Street is fairly sanguine about the road ahead. Consensus is that gross domestic product will grow 2.5 percent for the full year, according to FactSet, with hopes broadly pinned on increased consumer spending.
However, LaVorgna, who for years has held a strongly bullish and often above-consensus view, believes growth is slowing. For the full year he sees GDP rising just 1.2 percent, with risks tilted to the downside. Among other things, he believes companies have built up inventories that will take considerable time to be drawn down.
"Inventories are the biggest single reason why growth is likely to disappoint, but not the only reason," he said in a phone interview. "The length of the business cycle is a concern, profit margins have certainly peaked and the economy is being led by the consumer. There are plenty of periods where consumer spending has been positive during a recession."
To be clear, LaVorgna, Deutsche Bank's chief U.S. economist, doesn't see a recession as the most likely case for the economy this year, but he does believe there's about a 40 percent chance.