Deutsche Bank cuts US GDP forecasts

NEW YORK: Deutsche Bank economists on Tuesday reduced their forecast on US economic growth in the fourth quarter of 2015 and first quarter of 2016 due to recent disappointing data on trade, construction spending and manufacturing activity.

They said in a research note they pared their view on domestic gross product in the last three months of last year by 1 percentage point to 0.5 percent, which they added “still might be too high in light of what could be much larger inventory liquidation than what we have assumed.”

The year-end weakness would spread into the first quarter of this year. The economists scaled back their first-quarter GDP forecast by half a point, to 1.5 percent, they said. They stuck with their GDP estimates on the second quarter, third quarter and fourth quarter at 2.2 percent; 2.1 percent and 2.4 percent, respectively.

Despite the downgrades, the Deutsche Bank economists expect further improvement in the jobs market, which would allow the Federal Reserve to raise short-term interest rates by 25 basis points in the first quarter from the current 0.25-0.50 percent range.

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