Forex Flash: Stronger US Q4 GDP overshadowed by “fiscal cliff” - Merrill Lynch

FXstreet.com (Barcelona) - The good news in the US is that, based on preliminary data, GDP growth accelerated to 2% in Q3 and may be revised to 3%. “Despite the better news, we still see just 1.0% growth in each of the next two quarters. Much of the upward revisions in Q3 were due to a one-time boost in inventories, which will likely reverse”, wrote analyst Ethan S. Harris, seeing weaker retail sales in early Q4 and Hurricane Sandy slicing as much as 0.5pp off of Q4 growth.

Negotiations over the fiscal cliff are likely to be ugly. Democrats and Republicans have staked their initial negotiating position on the fiscal cliff. “As our regular readers know, we expect a complex negotiation process that takes many months and multiple brinkmanship moments before full resolution of the cliff. The news in the last week confirms several of our concerns”, Harris added.

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