We expect the slowing trend evident in December to extend into the first quarter of 2012, and are maintaining our 1.5%-2% Q1 forecast. As 2012 progresses, however, we expect a reacceleration of the U.S. economy based on:
- Pent-up investment demand, with durable goods order up a strong 3% in December and likely to translate into production gains in the first quarter;
- A pickup in Asia as China and others loosen monetary and credit policies and production shifts to meet domestic demand.
- And continued growth in corporate profits. Broad corporate profits (from the GDP data) have been one of the best leading indicators of GDP growth, falling well before GDP and rising during expansions. We won’t get fourth quarter profits from the GDP data for another month, but they are expected to have continued to grow, adding to the other types of income included in fourth quarter GDP and providing a platform for future GDP growth.