Photo: Richard Sunderland on flickr
Lots of buzz about the latest economic downgrade from JPMorgan:A few weeks ago we made some large downward revisions to our projection for growth in coming quarters, hoping to get in front of the weaker trajectory of the economy. Since then the weakness has gotten back in front of us. Consumer sentiment has tumbled and household wealth has deteriorated. Survey measures of capital spending intentions have moved lower and the housing market shows little sign of lifting. Small businesses, retailers, builders and manufacturers all report a weaker business environment. Global growth has disappointed and foreign growth forecasts have been taken lower. In response we are lowering our projection for growth, particularly in the quarters around the turn of the year.
Growth in the current quarter looks only moderately softer than our previous projection, however the risks to our previous projection for 2.5% growth in Q4 are now very clearly to the downside and we are lowering forecasted growth in that quarter to 1.0%. We are also lowering 12Q1 growth to 0.5% from 1.5%. In sum, over the next four quarters we don’t see growth that is much faster than the growth that took place in the first half of this year. Declining energy prices should help to cushion some of the weakness in the economy, and the still-low levels of cyclically-sensitive spending could reduce the chances of getting a negative GDP quarter. Nonetheless, the risks of a recession are clearly elevated.