Tags: blackrock | fisher | growth | economy

BlackRock’s Fisher: We’re Worried About Growth

Monday, 23 July 2012 09:40 AM

The growth in the U.S. economy is cooling so much that concerns are arising that it will hit stall speed and sputter out, said Peter Fisher, head of BlackRock Inc.’s fixed income portfolio management group.

U.S. gross domestic product grew 1.9 percent in the first quarter, well below initially forecast by many and beneath preliminary estimates of 2.2 percent.

With a cooling global economy and fears of a year-end “fiscal cliff”—a combination of expiring tax breaks and automatic spending cuts to government spending kicking in at the same time—the U.S. economy may be facing something a little more sinister than a mere soft patch.

“We’re worried about growth slowing down everywhere, and about it being self-reinforcing,” Fisher told USA Today.

“I’m less worried about whether growth is slowing, and more worried about how much farther we have to go.”

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

If left unchecked by Congress, the fiscal cliff could shave the federal budget deficit by an amount equal to 4 percent of GDP next year by some estimates, sending the country back into recession.

Fears of the cliff approaching may prompt businesses to hold off on investing and hiring, which could cool growth even further.

“It’s about fear and uncertainty,” said Mike Collins, a bond-portfolio manager at Prudential Fixed Income, USA Today reported. “When corporations have uncertainty, they cut back hiring and they cut capital spending. It feels like that’s what’s happening.”

Congress could tackle the fiscal cliff now, by adjusting the timing of tax hikes and spending cuts, yet lawmakers are hesitant to make fiscal adjustments in an election year.

Some have suggested letting the fiscal cliff approach on Jan. 1, 2013, and then let Congress make necessary adjustments on a retroactive basis afterward.

Still, other experts say a lack of faith in Congress to deal with the issue may hurt the economy more than the European debt crisis.

“The results [of failure to compromise] are bleak but clear-cut,” George Mason University Professor Stephen Fuller said in a report on the fiscal cliff, according to U.S. News & World Report.

“The unemployment rate will climb above 9 percent, pushing the economy toward recession and reducing projected growth in 2013 by two-thirds. An already weak economy will be undercut as the paychecks of thousands of workers across the economy will be affected from teachers, nurses, construction workers to key federal employees such as border patrol and FBI agents, food inspectors and others,” Fuller noted.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

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Monday, 23 July 2012 09:40 AM
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