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Is There a Consumer Comeback?

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    JPMorgan’s chief US economist Mike Feroli on whether there’s a consumer comeback underway.

  • Duration 3:14
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GDP forecast for the first quarter joining me now is Michael Farley chief US economist for JPMorgan.

See you raise the first quarter GDP forecast to 2.3 percent from one point five how come.

Well the retail sales numbers in those January February have been doing better than we expected.

You know we started the year with a pretty decent increase in payroll taxes than we thought that would.

Slow the consumer but as it turns out it's consumers kept spending and so nothing's nothing's happened -- -- -- bit of a surprise to us and we just have to respect the data as of France and and that implies a little stronger consumer spending.

MarketWatch named you their chief for -- their number one forecaster for the month of February which is pretty impressive but you talk about how.

You need change your forecast on the back of what happened with retail sales but what about consumer sentiment Marines say gotta respect -- the report.

Yeah it consumer sentiment didn't -- you.

Well the sentiment numbers.

Have been outcome all over the -- -- we saw today that the Michigan consumer sentiment number fell.

The last consumer confidence number which is produced by the conference board.

That rose the rest -- confidence numbers have been kind of sideways a home.

These sentiment numbers are really all over the map it's kind of hard to say exactly what's going on the consumer attitudes right now right you know.

This morning's number they referenced.

You know government policy concerns.

-- -- you know you're probably getting a lot of the sequester concerns.

And that number that was right around one of those numbers where I'm.

We're surveyed said that may be part of what's driving the drop we saw this morning -- you know consumers kind of looking -- a may be getting a little concerned about all the gas -- hearing out of Washington.

What -- the net impact on disposable income for consumers because one of the big concerns obviously is that payroll.

Tax -- it -- 77% of Americans saw their taxes go up as of the beginning of the year.

But you're all I I don't know but -- -- also wonder about the wealth of fact -- as people hear about the stock market going up day after day after day does that would how to those two things reconciling Chandler yeah.

Not mean the -- effect we've we're pretty confident as a big -- support to consumer spending in the first quarter.

-- a wealth of text and we think probably positive of the last few quarters so.

Yes incrementally the wealth effect is probably little more supportive in Q1 but.

Incrementally the drag from taxes is a lot more -- Harsh and in -- -- that's what's in my mind a little bit of a mystery -- kind of why did do -- it is a welcome back lighted it suddenly you know take this discrete step up -- -- of the year.

Now I totally agree of that and that is sort of hard -- Figure out -- first quarter forecast 2.3 percent where do you think we go from there in terms of growth -- -- -- that strong get stronger.

So we actually have a little bit of a pullback in the second quarter to one and a half I -- part of that's somewhat technical we think inventories may be getting built up a little.

Maybe a little too rapidly in the first quarter.

Aussie may start to feel some of the sequester in the second quarter but and I think -- yet the second half and on of the next year.

We think growth coming gradually gets better and to something you know above trend essentially.

Obviously the housing market is supportive and hopefully some of these fiscal.

Headwind start to date as we get -- couple quarters down the road.

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