Sequester may trigger soft GDP growth mid-year: Expert

In an interview to CNBC-TV18, Cary Leahey, Chief US Economist at Decision Economics spoke about what the sequester means for the US economy and by extension global markets.

He adds, "This is only a part of the fiscal tightening that is going on. If you include the loss of the so-called payroll tax holiday in January, the full impact on the economy is more in the order of 1.5 percentage point. So it is very significant and the sequester is only part of the restraint that is going on. So fixing the sequester will help but the loss of each family of USD 1000 payroll tax holiday in January is more important than any sequester". Talking about gross domestic product (GDP), Leahey said, "We will do well if we round up to about 2 percent growth rate. So it will be about the same as the last two years but it could be very soft in the middle of the year in reaction to not only the tax increases in January but to the sequester that is rolling in even if it is moderated".