Economic data since the start of the year have generally come in below expectations, raising the risks that we could slip into recession. We continue to believe that the economy will nominally avoid that outcome, but effectively it is a recession-like environment for decision makers. We now expect real GDP growth to slow to just a 0.2 percent pace in the first quarter and look for only 0.8 percent growth in the second quarter. Moreover, fourth quarter growth will likely be revised down from the initially reported 0.6 percent pace to around a 0.3 percent pace. With three quarters of growth this weak, another adverse shock would push the economy into negative territory.
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