Is the US heading for a double-dip recession?

Fears the US may fall back into recession is adding to investor nervousness. Here analysts and fund managers give their views.

Markets

Other markets

Market Data Notice

More market charts

by Deborah Hyde on Jun 11, 2010 at 14:33

Recent grim economic data in the US has led some to speculate the US may be heading back into recession or for a period of lower and volatile growth.

Here analysts, economists and fund managers give their views.

Richard Berner, analyst at Morgan Stanley:

In sharp contrast with market fears that the US economy is headed for significantly slower growth, or even a double-dip recession, we see the pace of activity quickening somewhat in coming months.

The threat of contagion from the European sovereign debt crisis remains a potentially significant headwind for global growth. And there have been straws in the wind for slower US growth:

The advance in first-quarter output was revised down; real consumer spending stalled and core capital goods orders declined in April; and the March-April surge in home sales probably will fade with the expiration of the first-time homebuyer tax credit.

As we see it, however, incoming data portray a robust economy, one accelerating from a 3% pace in Q1 to a 4% annual clip in Q2 even as consumer spending decelerates.

Simon Laing, A-rated fund manager of the Newton American fund:

Our feeling was that we would have a sharp recovery but that would moderate as we got through the year because of the structural problems such as deleveraging and the lack of credit being lent to the economy.

If you look at corporate earnings estimates, people were beginning to get a little exuberant on expected revenue growth. They were looking for 7% this year and another 7% on top of that that we always thought was going to be challenging.

What we're seeing now is the problems in Europe are bringing to the fore a lot of the structural problems in the economies including the US and what the implications of dealing with that are.

To step down into another recession you need another shock to the system, whether Europe's worries or Europe's issues get a lot worse (the ECB don't act and the bond markets backup) that could have a further contagion effect but I think the policies put in place look enough.

Email a friend

Email me when someone comments on this article Print

7 comments so far. Why not have your say?

Tim Drayson is the only panelist who comes close to facing reality. Living standards in the west, particularly the big overspending nations (PIGS-UK-USA) will have to fall. The actions of our government and the private bankers which they entrust the running of the economy to, will only ensure the rich/poor divide is increased.

report this

Stealing our BP dividends may stop it.

report this

I have my doubts as to whether the UK and US can balance their books in the medium term. Tax revenues are going to fall, even if tax rates are put up. Spending cuts are going to cause unemployment, and unemployment benefits are going to go up in total long before the private sector can grow enough to generate jobs.

Maybe we are all going to get jobs as gardeners and home helps for the minority who keep their well paid jobs controlling the few robot dependent manufacturers.

report this

rosy perspectives from salesmen/analysts

report this

Well said jeb fries.If you ask the opinion of people who want the public to invest (for them to become richer whatever the markets), you get "rosy perspectives from salesman/analyst".

report this

In an article Edward Chanellor clearly outlined the argument of the late Prof. Wynne Godley that for every borrower there must be a lender and it is inevitable that we must reverse the trade deficit before we can really address the massive debt problem. It is noted that Obama is being loud about the BP problem in the gulf and Alistair Darling in the papers today is adopting a "not me gov." position The first is hiding the real truth from the people and the second is in denial who has conveniently forgot that he was on watch with that other idiot Brown and should have steered us to a safer place and stopped the credit being thrown around like confetty. Let's hope in the UK we can rely on a governement to have the strength to be honest and be upfront on why we need this painful ajustment. Lessons from Singapore are needed.

report this

William Bishop

Jun 12, 2010 at 10:12

There may be just enough momentum elsewhere to keep the recovery ticking along in spite of a sub-par contribution from the consumer/employment/housing nexus, but it sems to be a close-run thing.

Longer term, Drayson's concerns seem apposite - there is likely to be at least one more sharp downturn before things hopefully get on a better footing.

report this

Please sign in here or register here to comment. It is free to register and only takes a minute or two.