Some economists search for sunshine and rainbows, others watch for signs of the coming Apocalypse. Recent data from the economy indicates a double dip recession, where the economy starts to improve after a fall, then plunges again before settling, is more probable than previously thought. Many think the fallout can be just as global as the last major plunge, as European analysts as well as those on Wall Street acknowledge it might happen.
Moody’s warns second slide possible
Recently, credit rating agency Moody’s released a report, through its research wing Moody’s Analytics, that puts the likelihood of a double dip recession at one in four, up from the previous estimate of one in five. 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. Moody’s also contends that the economy will shrink by a further 5 percent within the second dip.
Federal Reserve doesn’t see trees of green or skies of blue
The Federal Reserve doesn’t exactly think wine and roses are within the near future either. The Federal Reserve, as outlined by CNN Money, gave its forecast after an August 10 meeting, and they posited that economic recovery was going to take longer than envisioned, as economic growth was slower than hoped. The Fed did not address the possibility of a double dip recession, but did announce it would keep the federal funds rate at or near 0 percent and purchase further Treasury securities.
Ripples across the pond
The United States is not the only location where a double dip recession is possible. There could be effects of a double dip felt across the Atlantic as well. The trade deficit is widening, meaning American industries are exporting and selling fewer goods. That is less cash from foreign markets coming in. With a depressed real estate market, that is not a good recipe for getting out of the recession.
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
