THE END OF THE BERNANKE PUT?
• Data releases underscore a 2Q13 slowdown, but…
• A reassuring employment report offsets some of the gloom
• Improved fiscal outlook pushes fiscal issues to the background
• Fiscal and global growth drags could fade in 2H13 after a slow 1H13
• Bond markets crash in response to QE-III uncertainty
• Equity markets correction likely in the face of higher volatility
Sluggish Growth: Output growth in 1Q13 was revised slightly downward (in the first of three revisions), from an annualized 2.5% to 2.4%. With the exception of the government sector (which has been shrinking for 10 out of the last 11 quarters) growth was broad based, led by an upturn in private consumption expenditures and inventories. While fixed investment remained positive, non-residential investment has slowed. Residential investment growth, while robust at an annualized 12.1%, slowed from its peak of 17.6% in the previous quarter. Altogether, these numbers are another indication that the US economy still has trouble escaping from its tepid recovery in the context of a generally weak global economy.
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