Economists do make varied forecasts, and some are rosy and others not. Economic data from the last few months leads some to think a double dip recession, where the economy falters, begins to recover, then tumbles again before bottoming out, is starting to become a real possibility. European analysts also as Wall Street are thinking it might happen, and the fallout will be just as global.
Moody’s warns second slide possible
Moody’s, the credit rating agency, has put the chances of a second dip at 25 percent, up from their previous estimates of 20 percent, in a report by Moody’s Analytics. They have predicted real estate prices in a double dip recession will fall an additional 20 percent, according to the Wall Street Journal. The real estate market should stabilize in 2012, should that happen. It is also estimated the economy will shrink a further 5 percent if it should come to pass.
Skies of blue and red roses aren’t in Federal Reserve pictures either
The Federal Reserve doesn’t exactly think wine and roses are within the near future either. As outlined by CNN Money, the Federal Reserve announced after a meeting on Tuesday, August 10, 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. They didn’t bring up a double dip recession, but promised Federal Funds rates would stay at or near 0, and they would buy more Treasury securities.
Slower world recovery
The recession will continue to be global. There can be effects of a double dip felt across the Atlantic as well. Given the trade deficit is wider than ever, there is an indication that America, as a whole, is producing fewer goods for export. Having nothing to sell means no cash coming in. The trade deficits along with a troubled housing market don’t make great bedfellows for economic recovery.
Additional reading
Wall Street Journal
blogs.wsj.com/developments/2010/08/11/moodys-odds-of-a-double-dip-increasing-prices-could-fall-20/
CNN
money.cnn.com/2010/08/10/news/economy/fed_decision/index.htm
