Why UBS Just Cranked Up Its Q1 2012 Growth Forecast

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From UBS’ Maury N. Harris:The surge in payrolls in January provides further evidence that a virtuous cycle of economic activity is beginning to take hold. We have increased our outlook for Q1 2012 real GDP growth to 2.3% from 1.5%.

This is a function of increased consumer spending emanating from pent-up demand and a better labour market and credit conditions. It also reflects expectations that Federal government spending will rebound after plunging in Q4 2011. Risks remain: Europe has n.ot been “solved”. Faster growth and the recent rapid decline in labour force participation have caused us to revised down our estimate for the unemployment rate by year-end: we now expect a 7.9% rate versus our previous estimate of 8.6%.

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