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Global Macro-Market Outlook

United States Outlook Update: Stall Speed Is Here

By Prajakta Bhide and Christian Menegatti
Aug 1, 2011 6:25:00 PM | Last Updated

  • The recovery from the recession looks weaker than previously estimated; the extremely poor performance of H1 2011 goes beyond the effect of temporary factors related to the Japanese earthquake and MENA unrest.
  • Notwithstanding a technical rebound from very depressed levels as negative shocks dissipate, we now envisage H2 growth being lower than we previously expected. The economy looks increasingly at risk of tipping into recession.
  • QE3 now seems unavoidable in the context of a widening output gap in H1, a broad-based stall of employment growth and forthcoming increasing drag in fiscal policy. We now expect the Fed to stay on hold until H1 2013.

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