Fitch More Optimistic For 2013 US GDP Vs S&P; Sees 3% In 2014

Author: Market News International | Category: News

By Yali N’Diaye

WASHINGTON (MNI) – The latest economic forecasts from rating
agencies Standard & Poor’s and Fitch Friday show the latter remains more
optimistic about U.S. economic growth than its larger rival, especially
for next year.

Fitch released for the first time its GDP projection for 2014,
expecting the U.S. economy to grow at a pace of 3.0%, slightly more than
the 2.9% expected by Standard & Poor’s.

The gap between the two agencies’ GDP projections is slightly wider
for this year: 2.2% for Fitch and 2.0% for S&P.

But the largest divergence is for 2013, when the U.S. GDP growth
rate is expected to reach 2.1% by S&P and 2.6% by Fitch’s estimate.

In its Global Economic Outlook, Fitch revised down it world GDP
forecast by 0.1 point for both 2012 and 2013, led by downward revisions
in the euro zone but even more so — for 2012 — by emerging markets.

The latter are losing steam, the rating agency said, expecting
BRICs — Brazil, Russia, India and China — to grow at a pace of 6.0%
this year and 6.6%, revised down by 0.3 point, and 6.6% in 2013, which
was unrevised.

Even as emerging markets growth is still expected to outpace that
of major advanced economies by a significant margin over the next two
years, “The vulnerabilities of future BRICs growth to domestic and
global shocks have increased,” Fitch said.

In the eurozone, GDP is expected to decline this year by 0.4%
before recovering 0.9% in 2013, both revised down 0.2 point.

“Financial tension has resurfaced in the eurozone and the negative
impact on GDP growth will be significant,” Fitch said.

Fitch’s global growth forecast is 2.2% for 2012 and 2.8% in 2013,
compared with 2.3% and 2.9% in the previous Global Economic Outlook.

In the U.S., noting the recent slowdown in the job market signaling
weaker business sentiment, Fitch expects it “to be offset by continued
resilience in consumer spending.”

For 2012 and 2013, Fitch has kept its U.S. growth forecast
unchanged at 2.2% and 2.6% respectively, and projects and average growth
of 3.0% in 2014.

Turning to monetary policy in major advanced economies, Fitch said
record low interest rates are likely to stay in place through mid-2013,
warning that “The impact of further monetary stimulus would be doubtful
given the already minimal yields of safe haven assets at longer
maturity.”

Commenting on the June 19-20 Federal Reserve Federal open Market
Committee meeting, S&P’s Deputy Chief Economist Beth Ann Bovino said in
her June Monthly Forecast she does not “expect a balance sheet move.”

“Fed officials have indicated that they would need to see worsening
labor market conditions, a sharp slowdown in growth, greater risks to
the economic outlook, and a reemergence of deflationary risks before
they would act,” she said.

Still, “A dovish statement and a downward spin on Fed forecasts are
very likely, which takes it one step closer towards another
unconventional policy move,” the report continued.

It added that “with the momentum in the U.S. economy cooling and if
market financing dries up after the Greek vote, the Fed may be forced to
open its toolbox sooner than it thought.”

Standard & Poor’s expects the U.S. GDP to grow at a pace of 2.0%
this year, 2.1% in 2013, 2.9% in 2014 and 3.4% in 2015.

It does not expect the unemployment rate to fall below 8% before
2014, with the improvement accelerating the following year to 7.1%.

Standard & Poor’s remains the most pessimistic of the Big Three, as
Moody’s sees U.S. real GDP rate rising to 2.6% next year from 2.3% this
year, slightly more than Fitch’s 2.2% forecast. However, Moody’s
forecasts included in its May 15 Credit Opinion refer to fiscal years.

** MNI Washington Bureau: 202-371-2121 **

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