• The ‘fiscal cliff’ has been substantially scaled back. The fate of scheduled automatic budget cuts (delayed for only two months) is still subject to negotiation and an increase in the debt limit is also still to be agreed.
• TheU.S.economy continues to track along at a moderate pace. December quarter GDP growth is likely to be weak due to reversal of transitory factors that boosted the September quarter.
• Risks include a loss of confidence from the on-going debate over both the sequester budget cuts and the debt limit as well as a bigger than expected impact on consumption payroll and other tax increases.
• Growth is expected to solidify over 2013 and 2014. Overall, we expect GDP growth of 2.3% in 2012, 2.4% in 2013 and 2.9% in 2014.
• An end to the current QE program by late 2013/early 2014 is likely (well before any tightening in the Fed funds rate).

For further analysis download the full report.

• US Economic Update – January 2013 (PDF 245 KB)