James McAndrews is Executive Vice President and Director of Research, Federal Reserve Bank of New York. He gave a “Household Debt and Credit” press briefing February 27, 2013, as reported by Jann Swanson, Mortgage News Daily, CNBC.
McAndrews said several factors advise caution. First, for the last three years enthusiasm in the new year has turned to gloom by midyear. Second, households are still adjusting to January 1 tax adjustments which reduced disposable income for many. Third, while the full fiscal cliff was avoided in early January, there are many policy issues remaining, including the sequester. If the latter does happen and remains in effect for the full year it could reduce projected real GDP growth for 2013 by about ½ percentage point on top of the ¾ to 1 percentage point drag from already-implemented fiscal policy actions.
We also recommend our previous post: Economic Twists/Timing: Evans, Fisher, Feldstein, & Roubini