FXStreet (Delhi) – Economists at Deutsche Bank, has slashed their Q4 GDP forecast and they now expect Q4 real GDP to be just 0.5%, a full percentage point cut from the previous forecast while at the same time highlighting that this still might be too high in light of what could be a much larger inventory liquidation than what they have assumed. Key Quotes “This downward adjustment has the effect of now lowering their projected Q4-over-Q4 rate of real GDP growth by 30bps to 1.7%. They highlight however that some of the expected Q4 GDP softness may carry over into the current quarter and so have also trimmed their current quarter growth projection by 50bps to 1.5%.” “Highlighting the reasons for the downward changes to the forecasts, our team highlight that the data released over the last couple of weeks (i.e. durable goods, international trade, constructing spending and manufacturing ISM) have been softer than expected with most of this adjustment due to less stockpiling. They point out that there is a high correlation between the change in private inventories and the inventory component of the manufacturing ISM (nearly 0.8).” “In fact, last quarter ISM inventories fell to 44.3 from 48.8, the lowest since Q4 2009, when inventory liquidation totaled nearly -$50bn. This raises the possibility that inventories could in fact be lower than what they predict and raising the possibility of taking GDP temporarily into negative territory. It's worth reminding, as we noted yesterday, that the Atlanta Fed recently downgraded their Q4 GDP forecast to just 0.7%.” For more information, read our latest forex news.