Foodservice Equipment Reports

What’s The Impact If We Fall Off The Fiscal Cliff?

There is a very interesting discussion in the September issue of Blue Chip Economic Indicators of the potential impact on growth of gross domestic product in the U.S. if Congress and the President don’t somehow avoid the so-called “fiscal cliff,” the combination of tax hikes and automatic spending cuts passed in August 2011 as part of the Budget Control Act hammered out to raise the debt limit.

The Congressional Budget Office estimates that real GDP growth would be cut by half a percent in ’13 if the tax hikes and spending cuts go into effect for the entire year and that unemployment would rise back to 9%. Even if most of the tax increases and spending cuts are avoided, the CBO still only predicts real GDP growth of 1.7% next year on a Q4/Q4 basis.

The Blue Chip consensus is a bit more positive. Responding to a special question, 77% of the 50 economic forecasting groups surveyed said their current forecasts for growth next year “assume” the cliff will be “largely avoided.” And the odds of a recession next year: only one in four, the group says.

Given these views, the group left their forecasts of real GDP growth on an annual basis at 2.2% this year and 2.1% in ’13. The Blue Chip forecast for Q4/Q4 GDP growth in’13 is 2.4%.

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