United States: Economic Outlook

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

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(Since I wrote this article BEA revised 2012 Quarter IV GDP to +0.4% on March 28th from -0.1% on January 30th. Still, effectively, within margin of statistical error, US economy is at a standstill.)

On January 30th, 2013 United States Bureau of Economic Analysis (BEA) released the advance estimate of national income for the fourth quarter of 2012 from October 1 to December 31. It is disappointing. United States registered a negative GDP growth rate by year end-2012 relative to the quarter ending September 30th of the same year.

GDP has been volatile since 2007 (see chart below and a related article from these pages – The Popular Press And Economic Technicalities). US economy, however, in Quarter IV of 2012 contracted by 0.1% after a third quarter real gross domestic product (GDP) increase of 3.1%. United States was in a recession from Quarter III of 2008 to Quarter II of 2009. Once again in Quarter IV of 2012 change in GDP relative to the previous quarter is negative.

GDP Volatility, Source: BEA

GDP Volatility, Source: BEA

Fiscal cliff worries have lowered domestic investment and government expenditures. Unemployment has once again risen to 7.9% while the slowdown has caused disinflation. Year-on-Year Consumer Price Index (CPI) inflation is at 1.6%.

2013 is expected to follow Quarter IV of 2012 especially because of the impotence of monetary policy and the prospect of another increase in the debt ceiling with no resolution to the long term fiscal challenges of the United States (sequester is not a resolution but government reform is).

US economy has entered another recessionary phase foreboding more disinflation and higher unemployment.


About Chandrashekar (Chandra) Tamirisa

This entry was posted in Economics, Finance, Fiscal Policy, Monetary Policy, North America and Caribbean, Transformations LLC and tagged , , , . Bookmark the permalink.

One Response to United States: Economic Outlook

  1. Ethan Harris on US Economy: http://m.seekingalpha.com/article/1432001

    Fed policy thus far has purchased on average 1 Dow Jones point for 2.25 billion dollars or Dow recovery from 6500 to 14000 between 2007 and now for $16 trillion and an economic recovery in the United States during this same period. Unemployment fell by 1.1 percentage points from 9 per cent to 7.9 per cent. At issue is the quality of employment.

    The policy model is trickle down from financial markets to the real economy.


    Related articles:
    Markets on edge as Fed officials differ on bond-buying

    Sequester to Sock the Economy



    On the Senate’s 3.7 trillion dollar budget:

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