Double-dip recession may already be a fact in some countries.
Worries about a double-dip global recession have been rising in recent weeks. They began with the surprise report a month ago that GDP growth in the 16 Eurozone countries had declined to just 0.1% in the fourth quarter.
In recent days Sweden reported its economy did slide back into recession in the fourth quarter, its GDP growth coming in at minus 0.6%, (compared to its central bank’s forecast of 0.5% GDP growth), while Sweden, Denmark, and Norway reported unexpectedly slower fourth quarter growth.
With the additional problems in global economies so far this quarter related to the debt crises in Dubai, Greece, Spain, Italy, Portugal, Ireland, etc., it doesn’t seem that conditions are improving this quarter.
The double-dip worry has spread to the U.S. on recent negative economic reports. New home sales plunged 11% in January. Existing home sales fell 7.2%. Durable Goods Orders ex-aircraft fell 0.6%. Consumer incomes grew only 0.1% in January, the smallest rise in four months. Construction spending fell again in January, down 0.6%. Reports for February have continued the trend with Consumer Confidence plunging sharply in February, while the ISM manufacturing index fell to 56.5 in February from 58.4 in January.
Nobel prize winning economist Paul Krugman has been saying since December that the possibility of the U.S. economy sliding back into a double-dip recession in 2010 is “not a low probability event. Odds are about 30% to 40% of it happening.” He believes the catalysts will be the wind down of government stimulus programs, and businesses having completed the inventory rebuilding that boosted 4th quarter GDP.
It’s not just academics who are concerned.
Jamie Dimon, chairman of JP MorganChase, says a double dip in the economy is quite possible. Dimon adds that he believes a larger problem than the debt crisis in Greece and other European countries might be the debt crisis in California if it worsens, given the size of California’s economy and the potential for a ripple effect across the country.
We really need to see some positive surprises in economic reports fairly quickly to counter these worries about a double-dip.
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