News in Charts: US recovery rests on avoiding the fiscal cliff impact

The BEA today announced that the US economy grew faster than expected in the third quarter. Growth was revised up from a 2.0% annualised pace, to 2.7%, and things should continue to improve. According to the latest OECD forecasts, the US economy is the only G7 member expected to grow at 2% or above over the next two years. With housing on the mend and consumers increasingly confident, the US looks set to remain the best of a bad bunch among the major advanced economies. But there are still downside risks. Most significant among these is the so-called fiscal cliff of automatic tax hikes and spending cuts, currently set to come into law in the New Year. The associated drag on economic activity would be enough to tip the US back into recession, with potentially significant implications for global asset prices. In this newsletter, we take a look a closer look at the fiscal cliff: what it is, and what it would imply. The Fiscal Cliff Impact on the US GDP is represented below.

• Background
• What is the fiscal cliff?
• Impact on equity markets
• Impact on treasuries
• Impact on the global economy
• Conclusion

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