Econintersect: Hurricane Sandy notwithstanding, Goldman Sachs is projecting that GDP picked up in the third quarter, not at the 2.0% that has been estimated by the U.S. Department of Commerce but at a 2.8% to 2.9% annual rate. The same group is projecting GDP to grow 1.7% in the fourth quarter, curtailed by the after effects of Hurricane Sandy and the anticipatory actions of an economy facing the fiscal cliff.
If anticipated fiscal tightening does occur in resolving the fiscal cliff "event" the slower GDP growth should continue in Q1 2012 but be followed by stronger growth later in 2013.
The stronger economy now and through 2013 is attributed to a housing recovery, an improving job market, healthier household finances and spending on recovery from Sandy. Further accomodative monetary moves would also add to the growth.
Goldman is not alone in its optimism. Here is another positive outlook from Bloomberg:
James Bullard, president of the Federal Reserve Bank of St. Louis, is more optimistic. He predicts the economy will expand 3.5 percent next year, up from close to 2 percent in 2012, and unemployment will fall to 7.2 percent by the end of 2013.
But more caution is expressed by others:
Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, is among analysts who remain cautious for now. An upward revision to GDP for July-September would continue “a pattern over the last few years with some extremely poor quarters and some quarters that are much better,” he said. “The fourth quarter looks soft,” though “conditions are in place for accelerating growth” over the longer term.
The latest projections from Goldman Sachs are much stronger than the estimates published by them (Jim O'Neill, Chairman of Goldman Sachs Asset Management) just two months ago. At that time the projection for the year 2012 was 1.8% GDP growth. If the official preliminary estimate from the Commerce Department (2.0%) were to become the final figure, the fourth quarter would have to see 0% GDP growth to have the entire year come in at 1.8%.
If the latest estimate of 2.9% for the third quarter were to come to pass the fourth quarter would need a negative print (-0.7%) for the year to read 1.8%.
If the latest Goldman Sachs estimates prove out, GDP growth for the full year 2012 would come in at 2.0%.
- GDP Accelerating to 2.9% Helping U.S. Overcome Sandy Woes (Shobhana Chandra and Steve Matthews, Bloomberg, 18 November 2012)
- GDP Report: Continued Growth or Growing Weakness (Rick Davis, GEI Analysis, 27 October 2012)
- Real GDP Growth Forecasts From Jim O’Neill Of Goldman Sachs (Sunil Sharma, Market Remarks, 14 September 2012)