Citing a sharp decline in growth and an uncertain political climate, Citigroup Inc. and JPMorgan Chase & Co. both reduced their outlook for the U.S. economy for the remainder of the year and into 2012. JPMorgan analysts issued a note to clients predicting that U.S. Gross Domestic Product for the fourth quarter will fall from the earlier prediction of 2.5 percent to an anemic 1.0 percent. The bank also suggested the slowdown will extend into next year with the growth outlook for the first quarter of 2012 now slashed from 1.5 percent to just 0.5 percent.
Citigroup also picked up on the theme cutting its 2011 growth to 1.6 percent for the current year from an earlier view of 1.7 percent. For 2012, Citigroup has revised its stance downwards from 2.7 percent to 2.1 percent.
Growing Recession Fears
In addition to the outlook downgrade, both banks signaled the growing possibility of a return to recession for the U.S. economy. Morgan Stanley told clients that with the weaker growth now expected in the U.S. as well as a slowdown in Europe, the global economy is “dangerously close to recessionâ€.
JPMorgan’s chief economist, Michael Feroli, echoed the same sentiment noting that the revised outlook makes the risk of a recession “clearly elevatedâ€.
The political climate in Washington was also called into question in the wake of the debt crisis debacle that very nearly forced the country into defaulting on its debt payments. Citigroup analysts suggested that the “political paralysis†made for an uncertain future with little progress expected on plans to deal with the growing deficit and mounting debt.
