U.S. Economy Vulnerable, Again A Recession Time May Come
News Published on : 30th July 2011 in Bloomberg New
The world’s largest economy has yet to regain the ground it lost during the recession and may be vulnerable to a relapse.
Gross domestic product expanded at a 1.3 percent annual rate in the second quarter, after a 0.4 percent pace in the prior period, the worst six months since the recovery began in June 2009, Commerce Department figures showed yesterday. Economists said the slowdown leaves the recovery susceptible to being knocked off course by shocks at home or abroad.
“We are in a fairly risky situation,” said Nariman Behravesh, chief economist at IHS Inc. in Lexington, Massachusetts, the only firm polled by Bloomberg News to correctly forecast last quarter’s figure. “Growth is weak and there are some possible problems out there: our own fiscal situation, Europe’s debt crisis, and there is always a risk that oil prices could shoot up.”
The slow recovery left GDP at $13.27 trillion in the second quarter, below the $13.33 trillion peak of the fourth quarter of 2007, after a recession that was about 25 percent deeper than previously reported. That puts pressure on Federal Reserve policy makers to explore additional steps to boost the economy, including another round of bond purchases.
-----------------------------------------
-----------------------------------------
Recession Risk
“We could see a growing risk of recession in the fourth quarter, early 2012, if in fact the federal government gets it together and makes aggressive budget cuts,” LeBas said.
Economists are lowering forecasts for second-half growth in the wake of the latest GDP numbers and the stalemate in Washington. Behravesh of IHS said growth would at best reach 2 percent this quarter and could come in as low as 1 percent. In early July, he was projecting 3.4 percent.
Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities in New York, reduced his estimate by 1 percentage point to 2.5 percent for the third quarter, and trimmed it to 3 percent from 4.3 percent for the final three months of 2011.
------------------------------------------
Stocks Decline
Treasuries rallied, sending yields on 10-year notes to the lowest level this year, and stocks fell as economic growth trailed forecasts amid speculation lawmakers will reach a compromise to avoid a government default.
The yield on the benchmark 10-year note decreased to 2.79 percent at 4:21 p.m. yesterday in New York from 2.95 percent on July 28. The Standard & Poor’s 500 Index fell 0.7 percent to 1,292.28.
--------------------------------------------------------
Consumers Pull Back
Much of the weakness last quarter came from a pullback in consumer spending, which accounts for about 70 percent of the economy. Household purchases rose 0.1 percent, the smallest gain since the April-June quarter of 2009. The slump reflected a 4.4 percent plunge in purchases of durable goods like automobiles.
Higher expenses for food and energy may have curtailed spending on less essential items. The cost of a gallon of regular gasoline climbed in May to about $4 a gallon, the highest in almost three years, according to AAA, the nation’s biggest auto group.
The absence of faster job growth is also weighing on Americans. The unemployment rate climbed to 9.2 percent in June while payrolls grew by 18,000, the fewest in nine months, Labor Department figures showed on July 8.
-------------------------------------
Employment Outlook
The employment outlook remains dim. Whitehouse Station, New Jersey-based Merck & Co., the second-largest U.S. drugmaker, said yesterday that it plans to cut an additional 12,000 to 13,000 jobs by 2015. Earlier this month, announcements showed Cisco Systems Inc. (CSCO) will trim about 6,500 jobs worldwide; Goldman Sachs Group Inc. may reduce staff by about 1,000, and Lockheed Martin Corp. (LMT) will offer a voluntary separation plan to 6,500 employees.
------------------------------------------------------------------------------------------
Source : http://www.bloomberg.com/news/2011-07-30/economy-in-u-s-vulnerable-to-relapse-with-gdp-short-of-pre-recession-peak.html
Source : http://www.bloomberg.com/news/2011-07-30/economy-in-u-s-vulnerable-to-relapse-with-gdp-short-of-pre-recession-peak.html
No comments:
Post a Comment