We now expect the US economy to grow by just 2% this year, down from our previous forecast of 2.5%. Growth in 2012 is unlikely to be any better. This downward revision has nothing to do with the deficit reduction package, as this is not large enough to materially alter the near-term growth outlook or significantly address America's long-term fiscal problems. Nonetheless, the package does highlight that a move towards fiscal consolidation will constrain economic growth for a number of years.
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