It Starts: JPM Cuts Q1 GDP Forecast From 4% To 3.5%, Sees CPI Growing At 4%

And so the sunset of the QE2 inspired Golden Age begins: From JPM's Michael Ferolli: "We are revising down our projection for the annual growth rate of real GDP in Q1 from 4.0% to 3.5%. Prior to this week, first quarter growth had already been tracking a little soft relative to our forecast. In particular, consumers stumbled a bit to start the year, and while we expect them to pick up the pace some in coming months, the recent rise in energy prices poses a notable headwind. Most cyclical indicators remain quite favorable, and the unwind of adverse weather effects could support next quarter growth; for these reasons we are maintaining our second quarter growth forecast of 4%. If energy prices remain at their elevated level, however, this would pose a challenge to our outlook for next quarter. Another downside risk to Q2 GDP growth comes from the federal government sector, which could see a faster move to austerity than is in our current forecast. We've also revised our headline CPI forecast, particularly in Q1 where we now see the CPI increasing at a 4% annual rate. Below is our updated forecast spreadsheet."

Look for everyone else to jump on the downgrade bandwagon (fully confirmed when that Deutsche Bank excuse of an economic strategist starts turning bearish) as we have been expecting since January, and once Goldman gets in, and Bill Dudley passes the message from Hatzius to his Sith master (not to mention Hilsenrath), watch for the QE3 "rumors" to go ballistic.