Joe LaVorgna is one of the most consistently bullish economists on Wall Street. However, recent U.S. data has even him worried about growth.In a note today, he cut his forecast for real GDP growth in Q2 a full percentage point, from 2.4 per cent to 1.4 per cent. He reduced his year-long forecast from 2.4 per cent to 2.2 per cent as well.
“Recent economic news highlighting weaker inventory stocking as well as softer international trade have caused us to cut our forecast,” wrote LaVorgna.
It is worth noting that this cut requires 2.8 per cent growth in the second half to meet his end of year target, so LaVorgna is quite bullish for upcoming quarters. He thinks households will drive the recovery:
One substantive difference between this year and last is the household sector. As we have highlighted over the past month, consumer finances continue to improve. This makes us longer-term more constructive on the economy. Both household buying power and household liquid assets to liabilities are rising, and household debt to income continues to decline. At the same time, consumers have access to financing— commercial banks have been willing to extend consumer credit and this is evident in the data: Consumer credit has expanded at a year-to-date rate of +6.3%, which is a post-recession high.
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