Friday, January 03, 2014

Merrill Ups Q4 GDP Forecast to 3.0%

by Bill McBride on 1/03/2014 09:59:00 AM

2013 finished strong ...

From Merrill Lynch:

As we enter 2014, most of the data releases continue to surprise to the upside. We are now tracking 3.0% for 4Q GDP growth, following a solid 4.1% pace in 3Q. This is a marked improvement from the first half average growth rate of 1.8%. We should not be too surprised, however. The economy was hit with significant fiscal tightening at the beginning of 2013: taxes were hiked in January and the sequester spending cuts went into effect early in the year. The economy was able to handle the drag and has proved resilient. This leaves us feeling optimistic about the prospects for stronger growth to persist in 2014.

The gain in the second half of 2013 has been driven by the consumer. For 4Q, real consumer spending is tracking a solid 4.0% pace. ... We believe a pickup in consumer spending should leave businesses feeling more confident and willing to invest.