|by Tim Mullaney, USA TODAY|
After Friday's report that the economy grew at a 2% annual rate in the third quarter, what does the current quarter hold? And how about 2013?
The answer depends on who's right about the economy, and especially the so-called "fiscal cliff'' looming at year's end. Executives who invest in software, equipment and office space are pulling back, worried about how
"Consumers aren't as focused on the fiscal cliff,'' said
The housing recovery and strong consumer confidence would keep the economy growing, possibly as little as 1% in early 2013, even if the government-imposed austerity measures reduced GDP by 2%, Hanson said. That could take the form of ending the payroll tax cut while extending the Bush tax cuts, and saving some defense spending while cutting unemployment insurance taxes, he said.
The median forecast of 48 economists surveyed by
Growth of under 3% is still weak. Plus, the majority of economists surveyed assume
But if officials don't make a deal, the effect could be disastrous, according to the
"Across the board the uncertainty is crippling,'' said NAM Vice President
Uncertainty about the fiscal cliff is cutting growth this year by about 0.6 percentage points, the association estimates.
The split in confidence between companies and consumers is showing up in how they act.
The third-quarter report on gross domestic product showed big growth in consumer-goods categories such as autos, furniture and especially housing. Residential construction investment rose at an annual rate of 14.4%. Sales of cars and parts rose 6.4%, and recreational goods and vehicles climbed 17.7%.
This has shown up in the third-quarter results of some leading consumer companies. Travel agency
"While we do see signs of caution surrounding managed corporate travel spend(ing) in the U.S., we haven't felt any incremental effects on the rest of our brands,''
The picture is much grimmer for companies that sell to other corporations, especially in technology.
Investment in equipment and software was unchanged in the third quarter, the government said — after growing at an 18% annual rate during the same months last year.
Chipmaker Advanced Micro Devices plans to lay off 1,800 workers. Larger rival
Business investment could decline in this quarter due to uncertainty about the fiscal cliff's resolution, said
He is forecasting GDP growth of 1.2% this quarter because "business investment is deteriorating faster than I anticipated. If you know it's coming (in the first quarter) you're going to start dealing with it in the Q4 if not earlier."
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