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David Rosenberg: Dismal 1.5 Percent Growth Looms for Sluggish Economy  

Image: David Rosenberg: Dismal 1.5 Percent Growth Looms for Sluggish Economy  
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By    |   Friday, 21 Jul 2017 10:28 AM

Gluskin Sheff economist David Rosenberg warns that the sluggish U.S. economy will struggle to grow at a dismal pace as a plethora of warnings signs haunt investors.

“Looking ahead, things don’t look too good for the economy, even if recession is averted over the near-term. We are no longer talking about a 2% or 2%+ growth trajectory. Try closer to 1.5%,” he wrote in a recent outlook.

“And this comes at a time when the Citigroup economic surprise index just recently hit its lowest level since August 2011, when ‘double dip’ recession fears were all the rage and equity markets were still focused on what the economy was actually doing,” Business Insider reported that he wrote.

“But growth is weak and there is no sign of improvement. Maybe this is why growth stocks have done so well — since growth in the economy is scarce, you look for it wherever you can, and that would seem to reside in technology and healthcare,” he said.

“So we have a sluggish U.S. economy on our hands with growth revisions to the downside. We have a situation where some investors see the softness enduring long enough that Fed funds futures are now pricing in less than 50-50 odds that (Federal Reserve Chairman Janet) Yellen et al make another rate move by year-end. Yet the Fed is signaling that it will begin to shrink the balance sheet by the fourth quarter, with no economic liftoff,” he wrote.

“We have a central bank chief who looks to be a lame duck...a recent WSJ survey found that economists only peg her odds of staying on past February 2018 at 20.8%. Just more uncertainty to deal with,” he said.

“The political backdrop is rife with gridlock — unbelievably, there is still hope among investors that tax reform is coming by 2018. At the same time, evidence is mounting that the Dems have a serious shot of taking the House next year. We have a White House that, with the help of inside leaks and the media, continues to find itself embroiled in controversies. And healthcare reform, which was always pledged to be the first item to be done, is looking more and more like a pipe dream,” he explained.

“We have heightened geopolitical risks from North Korea and China has instructed the U.S. that it will not be pressured to invoke sanctions against its unstable satellite,” he said.

However, not all economic indicators paint such a gloomy future for the U.S.

Leading indicators increased 0.6 percent in June, beating estimates for a 0.4 percent rise according to economists polled by Reuters. This is up from a gain of 0.3 percent in the prior month, according to the Conference Board.

The index is a closely followed indicator for how healthy the U.S. economy is, CNBC explained.

The Conference Board tracks 10 components, including manufacturers' new orders, stock prices and average weekly initial claims for unemployment insurance.

“The U.S. LEI rose sharply in June, pointing to continued growth in the U.S. economy and perhaps even a moderate improvement in GDP growth in the second half of the year,” Ataman Ozyildirim, director of business cycles and growth research at the board, told MarketWatch.

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2017 is 2.5 percent on July 19, up from 2.4 percent on July 14.

(Newsmax wires services contributed to this report).

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Gluskin Sheff economist David Rosenberg warns that the sluggish U.S. economy will struggle to grow at a dismal pace as a plethora of warnings signs haunt investors.
david, rosenberg, economy, growth
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2017-28-21
Friday, 21 Jul 2017 10:28 AM
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