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3% Growth Ahead?

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  • Description

    Deutsche Bank senior U.S. economist Carl Riccadonna gives his outlook for the economy.

  • Duration 3:58
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OK so with a wave of spending cuts and tax hike.

Set to come into effect in just six month average -- on the fiscal cliff our economies approaching it.

Some are warning that could derail our fragile recovery but not our next guest joining us is probably -- senior US economist at Deutsche Bank -- great to have you.

Good afternoon thanks for having me on the program so we also told our Beers at the top of the hour that you're looking for growth pace ahead of most people around.

3% in reading your research -- -- you're also bullish on the labor market you're not concerned about exports gas prices you're not all that concerned about those either.

So why do you in such a good mood about the US economy.

Well there's a number of developments in the economy that debt suggest that we should see a yes sturdier pace of growth in the current year relative to the past.

And we are seeing.

A little bit of a repeat of last year and it it really -- not repeats.

Because so we are seeing.

But there are enough factors that that tell us that the industrial productions on a firmer footing by the labor markets in better shape.

Also productivity is slower so means that that we finally squeezed as much as we cannot of the labour force so additional GDP gains will allow produce a much faster pace of job gains.

I'm the mobile side in the prior cup and that you eat right what you're seeing with productivity how -- maxed it out and that really -- that is the job growth so quantify that -- -- -- Kelly listen in unemployment.

So productivity has stalled effectively in the economy and ordinarily you would say well that's a negative economic development.

But in the current environment it's just -- the economy needs it just the right time.

Because it tells us that now if Ford wants to produce more vehicles or -- service sector companies want to increase output.

They have to hire more workers.

Initially was very easy had during the the immediate aftermath of the recession to just death squeeze more out of your current doubt workforce.

Those those easy gains have largely have been taken.

At this point and that means that even if we didn't see.

The same lousy type of growth like we saw last year in the economy.

It will be accompanied by a much faster pace of job creation which means more income growth.

And that will provide a backstop to consumer spending as well that 70% of the economy so stronger consumer spending really helps us have made -- much different.

Growth outlook this year compared to past years and years to other factors that are helping.

-- we continue to export despite a European recession in Chinese slowdown by the export sector has that continually surprised analysts to the upside.

And also businesses and that even households are -- spending so -- things like capex and residential investment.

Are improving so we we have really strong domestically driven growth in the economy right now.

Which is very different from the last two years but even still I mean give -- everything you said you see GDP kicking up to 3.3 percent by the end of the year but then you see it decelerating to two point 6% at the beginning of next year how -- But there's a little bit of -- this there I think for the full year growth will come in at about 3% this year.

-- maybe some moderation nine next year part of this is the fiscal cliff that you mentioned at the top of the segment.

Without a doubt if no one does anything either fiscal cliff is a big problem -- will be a significant drag on GDP growth -- that's assuming that no one does anything.

Hi this is on everyone's radar screen from the private sector to the president to.

Candidate Romney.

Our congressional leadership Fed Chairman Treasury Secretary everyone knows this is coming and it's -- no one's interest to let it slide through so there will be some sort of compromise.

Maybe not until after the election maybe not until the new congress.

Sits down in January but.

Absolutely I'm confident that there will be a compromise.

That mitigates.

These tough fiscal headwinds.

All right Carl thanks so much we appreciate it.

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