If Friday’s 3.1 percent read on fourth-quarter GDP let you a little queasy, you may want to get the antacids ready for the year ahead.
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The most recent economic growth was a shade ahead of expectations, and it could be on the high side of the prints for the next couple of years
That’s because the figures so far haven’t included the likely inexorable surge in gas and food prices as well as the global turmoil that also will impede growth. Don’t like 3 percent? Than you’re going to hate 2 percent, or worse.
“The US economy appeared to have everything going for it headed into the New Year,” Paul Ashorth, US economist at Capital Economics in Toronto, said in a note to clients. “Increasingly, however, it seems that the rapid run up in food and energy prices is strangling growth in the real economy. The added uncertainty surrounding events in Japan, Libya and the Middle East isn’t helping either.”
Because of these unexpected headwinds, Ashworth believes first-quarter GDP is likely to be between 2 and 2.5 percent—or worse—even though full-year growth will still be 3 percent. He admitted that the fourth-quarter number was well below his target of as high as 4 percent and believes now that 2012 likely will see growth around 2 percent, way below trend for this point in a recovery.
“Ironically, the labor market is the only part of the economy still showing any unequivocal signs of improvement,” he wrote.
Consumption will be a drag on growth, he said, evidenced by the weak durable goods orders earlier this week.
Ashworth’s analysis comes two weeks after JPMorgan Chase lowered its GDP forecast to 2.5 percent. Goldman Sachs earlier this week warned that the drop in durable orders was a bad sign but said it was not yet ready to drop its estimates.
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