Double Dip Recession in USA

The threat of a new recession is rising in the United States, economists say, as they slash their growth forecasts for the second half of the year.

Slowing global expansion, the plunge in US stock markets after Standard & Poor's cut the country's credit rating, and political pressure on the government to cut spending rather than stimulate growth are all putting the brakes on the world's largest economy, they say.

Mostly negative data -- though with a few bright spots -- has reinforced feelings that the recovery from the 2008-2009 recession is in trouble.
And the Federal Reserve's own warning last week of increased "downside risks" to growth in the second half has added to the gloomy picture.

Mark Zandi, the top economist for Moody's Analytics, said Monday they had cut their growth outlook for the second half to 2.0 percent, from a 3.5 percent forecast just last month.

"The near-term economic outlook is significantly weaker than it was just a month ago," he said in a new report.

"The odds of a renewed recession over the next 12 months are one in three, and rising with each 100-point drop in the Dow."



Goldman Sachs said the economy appeared to be moving at less than "stall speed" after, at best, a mere 0.8 percent growth in the first half.

"With growth clearly below trend, the unemployment rate has crept up slightly, suggesting the possibility of a self-reinforcing deterioration in the economy," Goldman said -- also predicting a 33 percent chance for a recession.

A raft of poor economics statistics -- on second quarter growth, layoffs and job creation, industrial production, consumer spending, and consumer and business sentiment -- underpin the lower projections.

On Friday, a University of Michigan survey showed consumer sentiment at its lowest level since May 1980.

And on Monday, the Fed's New York manufacturing survey for August also took a sharp downward turn.

The Fed gave no sense of optimism last week when it announced it would keep interest rates at ultra-low levels for two more years because of the weak economy.

After a one-day meeting, the US central bank's policy board forecast growth at a "somewhat slower pace" over the coming quarters than it had estimated in June.

"Downside risks to the economic outlook have increased," it added.