Wednesday, July 27, 2011

Analysts at the major banks reduced US economic growth forecast

Analysts at the major banks such as Goldman Sachs, JPMorgan Chase and Bank of America-Merrill Lynch have reduced US economic growth forecast in the second quarter from 3.25% to 2.5%.
In their view, slower recovery will make the Federal Reserve hold the borrowing costs at the record minimum of 0-0.25%. JPMorgan and Goldman Sachs don’t rule out the possibility of the recession in the United States. 

The economists are worried as the growth in the second quarter was more due to the expansion of inventories rather than to demand. Domestic final sales which exclude inventories, exports and imports gained only 0.5% from April to June, while business inventories added 1% in both April and May.

The rise in inventories may be explained by the fact that Americans have become more worried about the future. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell in July to 63.8, the weakest reading since March 2009, three months before the recession ended. The deterioration in consumer confidence, in its turn, may be caused by the discouraging situation at the labor market. The unemployment rate rose in June to 9.2%.

Economists surveyed by Bloomberg News believe that US GDP added 1.8% in Q2 after rising by 1.9% during the first 3 months of the year. Data is released on Friday at 4:30 pm GMT.  

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