It looks like the fun times are set to continue. According to a recent Goldman Sachs analyst report growth in the USA is expected to remain just barely above the growth line at 1.5% in Q1 2013. This is in-line with my recent outlook forecast and dangerous water to be treading for the anti-recession believers. The fiscal cliff could easily tip the USA from being the best house in a bad neighborhood to the worst house in the neighborhood. Stay tuned as we near the year-end. Here’s more from Goldman (via Zero Hedge):
“We forecast a renewed slowdown in growth to 1½% in Q1, despite the healing in the private sector and renewed monetary easing.
In addition, the risks are almost exclusively on the downside of this “not so good” fiscal scenario. The probability that the upper-income Bush tax cuts and emergency unemployment legislation will expire, as well as that of a temporary hit from the entire cliff, has clearly risen in recent months. Adding these sources of restraint would take the overall fiscal drag to nearly 2 percentage points in early 2013, and more if the uncertainty effects are large. A sharper slowdown in GDP growth to 1% or less would likely result.
The tail risk is that Congress will fail to agree on any type of resolution for a more extended period, and the economy is hit with both the sequester and much bigger tax increases. While the impact of such a failure—especially those related to confidence and financial conditions—is harder to quantify, just the direct fiscal effect would imply a GDP growth hit of around 4 percentage points in early 2013, and likely a recession.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.