Everyone’s favorite permabullish meteorologist, Deutsche Bank’s very own Joe LaVorgna, has gone full-Zero Hedge of late, dropping the weather excuses for a decidedly bearish take on the state of the US economy.
Indeed it was just last month when LaVorgna cut his Q4 GDP estimate by “one full percentage point” citing “softer than expected data.”
Well don’t look now, but LaVorgna is back with yet another dire warning about the US “recovery,” this time slashing 2016 estimates due to a laundry list of factors including, but certainly not limited to, tighter financial conditions (apparently hiking into a decelerating economy wasn’t a good idea after all) and weak global growth.
Below, find more from LaVorgna.
We have reduced our estimates of Q1, Q2 and Q3 real GDP growth in 2016 to 0.5%, 1.0% and 1.2%, respectively. Our Q4 2016 forecast remains unchanged at 2.4%. This compares to our previous projections of 1.5%, 2.2% and 2.1%, respectively. Consequently, full-year 2016 real GDP growth, as measured on a Q4-over-Q4 basis, is now 1.3%, compared to our prior projection of 2.0%. If our forecast is correct, inflation-adjusted output growth in 2016 would match the 2012 post-recession low (Q4/Q4).
However, economic activity could be substantially softer if financial conditions were to tighten meaningfully further. We remain concerned about downside risks to output and inflation. With respect to the latter, the table below shows that we expect core inflation to soften in the months ahead.
We do not expect the Fed to raise rates in March because Q1 GDP growth will likely be very soft, and policymakers will need more time to gauge whether financial conditions will weigh more extensively on economic activity. A rate hike in June or September would probably require growth and inflation to rebound much more than we currently project. Therefore, a rate hike in December seems most likely.
There are two ways to look at this. On the one hand, you might be inclined to think that it’s especially bad news when the Street’s permabulls turn bearish. On the other hand, this is a man who once lost a forecasting contest to a groundhog…
… so perhaps a rip-roaring economic recovery is just around the corner.
Incidentally, while LaVorgna is “revising down” is outlook for the US economy, the market is rapidly “revising down” its outlook for his employer.
via Zero Hedge http://ift.tt/1NZVkzf Tyler Durden