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Forecast for Economic Activity

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    Deutsche Bank Securities senior economist Carl Riccadonna gives his outlook for economic growth.

  • Duration 3:39
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We -- this morning the latest take on GDP on the rise in the third quarter an upward revision which appears nice but my next guest expects.

Growth will decline significantly for the fourth quarter joining me today's -- -- Donna Deutsche Bank securities senior US economist with his outlook for next year.

And if we get to some expectations on continued stimulus care the Fed which we heard from this week as well -- let's -- -- stadium thanks pat me on a case of this was the second print out of three on the third quarter gross domestic product at first blush looked like a nice upward revision to point 7% from about 2%.

But if you look under the hood there -- some serious problems -- -- -- start there.

Not so good a little bit of hope friend devil we had delve into the finer details of the report consumer spending was revised lower.

-- also business investment done equipment and software what we call capex.

How was revised lower as well so the fit the upward revision was really due to a lot more inventory being accumulated last quarter which is partly due to.

A softer pace of economic activity so not the type of strong number or strengthening in the number we'd like to see.

When you see an inventory build like that does -- suggest is -- go to the softening consumer spending picture that people just aren't buying stuff simply -- there's a wait and see attitude diet with clear with consumers it's also very clear what that business is not only for these sorts of capital investments but also in terms of the pace of hiring.

That we're seeing in the economy I think a lot of folks for.

Waiting to see what happened with the election also waiting to see -- what the eventual resolution of the fiscal cliff will be which is we've been talking about there is no resolution seems to coming.

To.

Stalling pace if any pace at all least today.

And it goes to a lot of economists perhaps you as well here that.

Just this concern an honest dialogue about the fiscal cliff has already starting to hurt the economy do you agree absolutely it's already having an impact and you see that in that decelerating pace of business investment spending.

And -- can only get worse as we get closer to the end of the year and you know if everybody holds their breath in the economy collectively.

That we've got big problems because the economy will still wanting in the first print on the third quarter was the incredible amount of government spending -- on defense.

That -- we -- number what -- -- in government spending I know it didn't change a lot but it's still really -- in the biggest factors in front and that's a little concerning to well 888.

Was a positive factor out last quarter the issue really is what happens in the current quarter and going into the beginning of next year because its fiscal cliff.

-- not only includes tax increases but also significant reductions in defense spending in other types of discretionary spending -- well.

-- the total size of the clip this 500000000600.

Billion dollars of the economy simply cannot withstand that sort of shock.

How we saw a week.

Weak underlying details in today's report we know the economy will be even softer in the current quarter -- due in part to hurricane sandy but also due to these slowing trends in the various components so one point seven is the consensus estimate for the fourth quarter case.

An expansion what -- -- thinking -- I -- or single point seven now we're forecasting one point 3% well let's say we were different in that they in the ballpark of one point seven -- illness or an advantage is sandy -- -- -- flops -- about a half a percentage -- -- of -- -- -- 13 and that looks more like -- ceiling -- the -- -- -- can you leave -- -- -- a positive -- anything.

He can cut -- until -- -- -- generated some good news OK if we can get to the fiscal -- things don't look all that bad next year.

One of the key reasons why next you'll be a little bit different is that the housing market is finally recovering sales volumes are picking up also home prices are increasing and non residential spending was higher in the reminds us -- -- -- for consumer right yes great convert it got so much -- talking about the question even the most it was disappointing.

That's -- -- our.

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