Nouriel Roubini's Global EconoMonitor

Nouriel on Bloomberg: U.S. Growth Will Be “Barely 1.7%” in 2013

On Bloomberg Surveillance, Nouriel said that U.S. growth would barely register 1.7% in 2013 and pointed to a high risk of the U.S. going over the fiscal cliff: “If we do so, the market reaction is going to force the two sides to reach an agreement.”

Asked whether he’s bullish on the U.S., Nouriel responded, “In the long term, I think that the fundamentals of the U.S. are a lot stronger than other advanced countries. In the short run I think we will have another year of very anemic economic growth. Next year we will have barely 1.7% including a modest amount of fiscal drag and lots of tail risk could make it worse in the U.S–bigger fiscal cliff, the euro zone crisis, a Chinese hard landing, maybe tensions will raise oil prices in the Middle East–so the downside scenario is actually having a meaningful probability.”

Regarding whether a U.S. housing recovery is definitely underway, Nouriel said,I do believe there is a housing recovery but I think that those that are more optimistic about it are going to be proven wrong next year. Housing can increase say 10 to 15% in real terms of residential investment but at the peak it was 6% of GDP, right now it’s only 2% of GDP, so the direct effect on GDP growth is going to be very small.”

In terms of positives in the U.S. economy, Nouriel pointed to “a housing recovery, shale gas revaluation, some reshoring of manufacturing, some job creation, QE3 is going to help. But even in a scenario where we avoid the cliff, we expect there will be a fiscal adjustment of 1.4% of GDP next year….you will have a 1.25% drag on growth in an economy that is barely growing.”

Nouriel highlighted the problems with gridlock in Washington, saying, “Republicans are vetoing tax increases and Democrats don’t want entitlement reform. People talk about the cliff, but there are several things. There’s the issue about the budget in 2013, then there will be the debt ceiling debate, another debate about medium term fiscal consolidation, within that we will have a debate about fundamental tax reform and then we have entitlement reform.”

Asked whether he would accept the position of treasury secretary if President Obama were to offer it, Nouriel said, “He is not going to call on me. There are great people out there. I was in politics, it was two great years, but I think as a public intellectual, I can provide input to the debate where I am now.”

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24 Responses to “Nouriel on Bloomberg: U.S. Growth Will Be “Barely 1.7%” in 2013”

nelswightDecember 19th, 2012 at 4:03 pm

I would like to see someone as capable and responsible as Nouriel Roubini performing the job of Treasury Secretary for us. He is a most admirable person for us to have.

carlyleDecember 19th, 2012 at 6:29 pm

Since every dollar of spending cuts comes from somone's paycheck or profit I hope this decrease in demand does not send us into a Great Britain type doldrum. We really need a stronger negotiater on our side. President Obama folded under pressure last time and gave away the farm.

Carl GareauDecember 20th, 2012 at 1:45 pm

let's see now we've spent 2,000,000,000,000 dollars of Chinese savings 1,000,000,000,000 dollars of Japanese savings the next generations saving use and we can stop spending because it might cause a recession Wow, the logic is mind boggling.

GlenDecember 22nd, 2012 at 11:32 pm

Does the federal reserves QE over the last several years just delayed the political changes that have to be made? QE has provided short term stimulus when fundamental changes to our economy need to be addressed? Problems have to be resolved but the feds action delayed this?
While people suffer for no reason. Fed made things worse? Would not a zero% tax rate for the first 20k of income create the demand that is so desperately needed.

glenDecember 22nd, 2012 at 11:39 pm

When you borrow at zero percent is it the same as borrowing at 10 percent. At 2% percent for 30 years. Its what you do with borrowed money thats important. China is now wasting there money that they provided us by selling us steel for less than it costs to make it.

lisaDecember 28th, 2012 at 2:17 pm

Here's a quote from Krugman:

"If you look, for example, at the CBO’s long-run budget outlook, it assumes that productivity growth over the long term will be 1.7 percent a year (p. 34), which is roughly equal to average productivity growth since 1973. But it also assumes that compensation will grow roughly in line with productivity, which has not at all been the experience of the past 30 years."

My comments re: Krugman and Roubini:
Perhaps the distortions of expectation and publication needs to be clarified by reading some other research. So what do I mean by that little remark. Well, it seems to me that Roubini is dramatizing to the negative that 1.7 is bad. Well, is it? It seems to me that from what I have read of CBO and other federal projections that 1.7 to 2 percent is the expected norm for the US. If 1.7 is about the norm over a 30 year period for productivity growth, which I presume is equal to GDP then what is all the fuss about? Perhaps the real problem, is that issue about "compensation growth factors" for the majority population of US citizens? (not including individuals who may reside in the US with or without visas or some other legal status)

Perhaps, there can be some further explanation about expectations vs. reality somewhere else. Can the following four sentences throw some light on what's the matter?

1."Poor policy choices could derail ‘middling’ recovery"
2.‘Small business’ and top marginal rates: Tax filers affected by proposed rate increases are not necessarily small, or businesses, or job creators"
3."A projected 13.1 percent of workers will be unemployed at some point in 2013"
4."Restore full employment with a massive infrastructure program"

Those itemized four sentences are headlines to explanatory research articles @

lisaDecember 28th, 2012 at 2:30 pm

Yes, I like Roubini, (I even actually purchased his latest book in hardcover no less) however, I sure don't like all the hype about the fiscal cliff stuff. EPI.ORG has a good headline about the fiscal cliff hype too. Why is Roubini jumping on the FC bandwagon too? It seems to me that the FC hype just reinforces the FU reality for uh, like at least more than 47% percent of the US population.

Pedro BatistaDecember 28th, 2012 at 5:16 pm

I do think, his name (Nouriel Roubini) for treasury secretary very well put. I do also think that Paul krugman for US central bank are the best things to come for the new year. Please Santa bring them, quickly.

W HalversonJanuary 15th, 2013 at 3:12 pm

Sorry Glen, no credit for the simple reason that all those 1% US bonds will ultimately have to either be paid back or refinanced. What are the chances interest rates will be this low for the next ten years? Right now interest expense consumes 17% of the US Federal budget.

If we have to refinance debt at higher interest rates, we won't have the money – or be able to borrow it – to continue with our welfare state and service the debt.

joojJune 24th, 2013 at 12:10 pm

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foot painJuly 8th, 2013 at 4:56 pm

It would be nice if the united states didn't go over the fiscal cliff and all assets stayed the same and people don't need to lose money.

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David BAugust 16th, 2013 at 6:41 pm

I agree. I read his book "Bailouts or Bail-Ins.." recently and it was excellent. He's made some excellent macro-economic calls over the years, well respected in the committee and if I remember correctly he was one of the early predictors of the SubPrime mess..