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Merrill Lynch: Q1 GDP Growth As Low As 2.5%

By John S. McClenahen Large year-end inventories of cars at Ford, GM and DaimlerChrysler are one of the reasons that U.S. economic growth during the first quarter of 2005 might not be as much as already-modest expectations, suggests David A. Rosenberg, chief North American economist at Merrill Lynch & Co., New York. "There is a very good chance that GDP will come in below 3%, perhaps as low as [a seasonally adjusted annual rate of] 2.5%," says Rosenberg. In addition to a hefty hangover of autos going into the new year, he points out that non-defense capital goods orders are down six of the last seven months, layoffs during the past three months have been more than 50% higher than usual, and the Conference Board's index of leading economic indicators has fallen for five consecutive months.

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