Outlook and Market Review - Fourth Quarter 2013

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Economic growth remains sluggish and inflation is not on the radar screen. The Bureau of Economic Analysis revised fourth quarter GDP growth to a 2.4% rate following a revised third quarter 2013 rate of 4.1%. Inventory accumulation boosted third quarter growth but then bled some growth away from the fourth quarter. For all of 2013 GDP growth was only 1.9%. Inflation on both consumer and producer levels is well below 2% and there are no signs that it will pick up in 2014. Low and declining rates of inflation are now a global phenomenon and there is concern that disinflation will make it harder to achieve higher growth rates, since low inflation discourages immediate consumption and hurts borrowers. While the deficit is getting smaller due to cuts in defense and discretionary spending, national debt is expected to continue to grow by approximately $500 billion over the course of the fiscal year. Higher revisions to affordable Health care Act costs will present a major obstacle to controlling entitlement spending. Many economists to include Alan Greenspan, the former Fed Chair, are now pointing to the large and growing debt of the U.S. government as the major obstacle to future growth.