US Economists see slower growth, Fiscal Cliff ahead

About 90% of economists questioned for a prominent survey believe there will be a 'moderate' or 'small' impact to US economic growth in 2-H of this year resulting from the threat of the 'fiscal cliff' the US faces at the end of Y 2012.

Beginning in January 2013, US taxes are scheduled to rise sharply and federal spending is set to be cut sharply unless Congress takes action by the end of Y 2012.

A delay in reaching an agreement until after the 6 November elections is likely to put business investment in the deep freezer, and hiring for the next several months will cease.

Businesses are very likely to be unwilling to investment in more capacity if consumers will not have the money to buy the products.

US production and capacity utilization totaled 78.9% in June according to the latest report from the Federal Reserve, about 1.3% below the long-term average (1972-2011), though well above the 66.8% utilization rate at the low point in Y 2009 and below the high of 85.2% in 1988-89. Since June 2011 growth in capacity utilization has been just 2.3%.

There's little reason for new business investment if production capacity is already under-utilized, so the economists are not telling us anything we do not know in here.

And as for the impact of higher taxes combined with cuts in government spending, that too has been very obvious for a very long time now.

The consequences of falling off the "Fiscal Cliff" is very important and bears broadcasting repeatedly, and perhaps some of "leaders" in the Halls of Power will get it.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.