Double Dip? You Already Know the Answer

by: Michael Panzner

OK, time to relax: the media, the central bank, a great many mainstream economists, and the Organization of Economic Co-Operation and Development are claiming that further economic weakness is off the table:

"Fears of a Second Recession Ease, at Least for Now" (Associated Press)

WASHINGTON — No, the economy isn't roaring ahead. And no, companies aren't making lots of job offers. But a fresh batch of economic data Thursday at least eased summertime fears that the economy might be on the brink of another recession.

Far fewer people applied for unemployment aid last week, suggesting layoffs are easing. And the nation's trade deficit narrowed in July, thanks to a bigger appetite overseas for American exports.

Other recent data support the notion that the economy, while growing only fitfully, is at least not in danger of stalling:

"Fed Regional Survey Shows No Sign of 'Double Dip'" (Bloomberg News)

The "beige book" report shows that even though the recovery is stalling, the economy doesn't seem to be slipping into a repeated recession.

The Federal Reserve said Wednesday that the U.S. economy maintained its expansion while showing "widespread signs of a deceleration" in mid-July through the end of August, according to a survey by 12 regional Fed banks.

Five regional banks reported "economic growth at a moderate pace" and two pointed to "positive developments or net improvements." The remaining five banks said conditions were mixed or decelerating.

The report underscores the Fed's view that while the recovery from the worst recession in seven decades has cooled, the economy isn't relapsing into a contraction. In a speech last month in Jackson Hole, Wyo., Fed Chairman Ben Bernanke said "the preconditions for a pickup in growth in 2011 appear to remain in place."

"Double Dip Unlikely: Wells Fargo" (Bank Investment Consultant)

While it’s not back on its feet yet, the U.S. economy is proving more resilient than many naysayers predicted, according to September’s Monthly Outlook from Wells Fargo’s economics group.

If modest gains in July and August turn out to be an upward trend, which Wells Fargo deems likely, GDP will follow suit. While it is currently weak, at 1.6% in the second quarter, that growth should compensate in part for the government’s stimulus packages, which are now winding down and will soon be gone.

Meanwhile, business fixed investment rose “solidly” in the second quarter and consumer spending and savings rates are also on the rise.

Wells expects the 1.6% GDP growth rate to hold steady for the remainder of the year, but will pick up speed in 2011, so long as the Federal Reserve doesn’t raise interest rates.

"Double-Dip Recession Unlikely, Says OECD" (Finance Markets)

Influential think tank, the Organisation for Economic Co-operation and Development (OECD), has today said the global economic recovery is slowing faster and has therefore revised its growth forecast downwards for the G7 leading economies.

However, the think tank has said a return to recession is unlikely but “great uncertainty” remains.

It has therefore slightly revised its growth forecast for 2010 for the G7 nations to 1.5%, from the 1.75% it forecast in May.

Commenting, OECD’s chief economist Pier Carlo Padoan, said: “The uncertainty is caused by a combination of factors, but it is unlikely that we are heading into another downturn.”

Then again, it appears that one rather large group of individuals has a different perspective:

"StrategyOne Survey: Two-Thirds of Americans Expect Double-Dip Recession, Brace for Second Hit Worse Than the First" (PRNewswire)

Public fearful about prospects for economic recovery

Almost half see America's 'best days' behind us, 7 in 10 concerned country is 'fundamentally broken and not working'

PRNewswire-USNewswire/ -- Almost two in three Americans (65%) say a double-dip recession — defined as a recession followed by a short-lived recovery, followed by another recession — is now likely to happen. Among those who expect a double-dip recession, nearly half (44%) fear it will be worse than the first one, with 21% worried it will be "much more severe." Just 24% think the second recession will be less severe.

These findings come from a recently conducted survey of 1,043 Americans by the polling firm StrategyOne, a Daniel J. Edelman company.

As they are bracing for a second downturn, Americans are certainly not holding their breath for a full recovery coming anytime soon. Just 5% think there will be a full economic recovery by the end of this year, and only another 21% see recovery taking place by the end of 2011. Half of all Americans polled (50%) see a recovery not coming until sometime after the end of 2011, and about a quarter (23%) doubt our economy will ever fully recover.

Once again, I have to ask myself: Who should I believe? Of course, you know the answer.