Winter optimism faded this spring. Recent economic data and rising uncertainty signal that the moderate acceleration in economic activity we had previously forecast for the second half of this year is less likely to unfold.
Document Highlights
Optimism fades as risks rise.
- Disappointing employment gains signal weaker growth in current quarter
- Increasing cautiousness suggests further slowing in second half of the year
- Concerns about a disorderly outcome in Europe and a slowing in emerging markets are adding downside risk to U.S. economic outlook
- U.S. faces an enormous yearend fiscal cliff, but temporary measures should help avoid a large economic contraction
- However, divided and “broken” government leads to only temporary fiscal measures, failing to provide any policy certainty
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