Economists do make varied forecasts, and some are rosy and others not. Recent economic data has given some experts reason to think that a double dip recession, where economic activity plunges, ticks up slightly, then plunges again before stabilizing, is beginning to look more probable. The forecast for doom and gloom is not native to only Wall Street as economists in Europe are starting to think it will happen there also, and the second tumble may also be global.
Moody’s warns of possible second slide
Moody’s Analytics, a research division of credit rating agency Moody’s, has put the odds of a second dip at 25 percent, up from previous estimates of 20 percent. According to the Wall Street Journal, Moody’s has forecasted that if a double dip recession does occur, real estate prices could fall a further 20 percent. The company believes the real estate market will stabilize sometime in 2012. The economy will also shrink a further 5 percent, as outlined by Moody’s.
Skies of blue and red roses aren’t in Federal Reserve pictures either
The forecast from the Federal Reserve is not one of days of wine and roses either. According to 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. 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
If a double dip recession happens, it could be global in scope. A European double dip recession is possible 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 money coming in. The trade deficits along with a troubled housing market do not make good bedfellows for economic recovery.
Discover more info on this subject
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
