Some economists look for sunshine and rainbows, others look for signs of the coming Apocalypse. Recent data on the economy indicates a double dip recession, where the economy starts to improve after a fall but then plunges again before settling, is more likely than previously thought. European analysts as well as Wall Street executives are thinking it might happen, and that the fallout will be just as global.
Second dip claimed possible by Moody’s
Moody’s Analytics, a research division of credit rating agency Moody’s, has put the odds of a second dip at 25 percent, up from previous estimates of 20 percent. The firm has predicted real estate prices in a double dip recession will fall another 20 percent, according to the Wall Street Journal. The prediction is that in that event the real estate market will stabilize in 2012. The economy will also shrink a further 5 percent, according to Moody’s.
Federal Reserve doesn’t see rainbows either
The forecast from the Federal Reserve is not one of days of wine and roses either. According to CNN Money, the Federal Reserve announced after a meeting on Tuesday that the economy was not recovering as fast as had been hoped, and it will take longer than previously estimated for things to return to peak output. The Fed didn’t bring up a double dip recession but promised Federal Funds rates would stay at or near zero and said the Fed will buy more Treasury securities.
Doom and gloom across the globe
If a double dip recession happens, it will be global in scope. Europe will also feel the effects of a double dip recession. The trade deficit is widening, meaning American industries are exporting and selling fewer goods. That means less income is being received from overseas markets. With a depressed real estate market, that is not a great recipe for getting out of the recession.
Wall Street Journal: http://blogs.wsj.com/developments/2010/08/11/moodys-odds-of-a-double-dip-increasing-prices-could-fall-20/
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