A Short Note On The Forecast For The US Economy

By Chandrashekar (Chandra) Tamirisa, (On Twitter) @c_tamirisa

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The Bureau of Economic Analysis (BEA) has released its 2011 Second Estimate of US Gross Domestic Product (GDP) for Quarter 2. The news release shows a downward revision from 1.3 per cent in the Advanced Estimate to 1.0 per cent in the Second Estimate.

The National Income and Product Accounts (NIPA) table shows a steady deceleration in the annual economic growth rate from 3.0 per cent in 2010 to around 1.0 per cent in 2011. This is an estimated annual fall of 2 per cent, optimistically assuming 1.0 per cent growth rates in the remaining quarters of 2011 (3 and 4) and no further downward revisions of Quarter 2 data.

BEA data does not support the Federal Reserve’s 2009 judgment of a steady state growth rate of 1.5 per cent by mid-2011, steady state meaning self-sustaining growth at “neutral” or neither accommodative nor restrictive monetary and fiscal policy stances.

The data shows a steady quarter-by-quarter slowdown since the 2010 recovery. 2011 data displays a trend of non-steady state non-self sustaining recovery, returning the economy into a recession before the election of 2012 if not earlier by the end of this year, given that both monetary and fiscal policies are their most accommodative. Domestic private investment stemming from exports is being supported by the downward pressure on the dollar.

Transformations LLC, therefore, advises investors to expect, under the current structure of monetary and fiscal policies, the US economy to enter and remain in recession accompanied by significant consumption and employment uncertainty for the foreseeable future.


About Chandrashekar (Chandra) Tamirisa

This entry was posted in Fiscal Policy, Monetary Policy, National Security and Defense, Politics and tagged , . Bookmark the permalink.

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