Working Papers

I Know What Nouriel Roubini Did Last Summer II

The slow death of Nouriel Roubini’s forecast for flat US GDP growth in Q4 continues, with the December retail trade report.  One economist’s reaction:

Almost every piece of recent economic data - employment, unemployment claims, car and truck production, construction, and the ISM indexes for both manufacturing and services - has come in above expectations.  Today’s report on retail sales is no different.  The economy ended 2006 with a full head off steam.  Weakness in housing has not filtered through to the rest of the economy.  Retail sales, excluding autos and building materials, are a direct feed into GDP data (auto sales data come from another source and building materials are counted as investment).  With these sales up 1.3% in December after a revised 0.9% gain in November, real consumption growth likely increased about 4.5% at an annual rate in the fourth quarter.  Our forecast for fourth quarter real GDP growth is now 3.5%, a significant improvement from the second and third quarter average growth rate of 2.4%.  At this rate of growth the Fed is going to get increasingly uncomfortable with market expectations of its next move being a rate cut rather than a rate hike.


posted on 13 January 2007 by skirchner in Economics, Financial Markets

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