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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (66309)	7/18/2006 1:41:28 PM
From: CalculatedRisk	Respond to of 110194

Dr. Roubini: A Coming Recession in the U.S. Economy? Certainly There is Now a Much Higher Risk of One... rgemonitor.com I have so far been somehow cautious in my bearish call for the U.S. economy. My pessimistic views have been far from the consensus of a 3.5% US growth moderating to 3% in H2: I have argued that the U.S. will slow down to an annualized growth rate of 2% by Q4 of this year. This is certainly a negative outlook for the U.S. and global economy (given my arguments against "decoupling") and for the markets; but it was not a recession call. I am now revising my view by assigning a larger probability to a U.S. recession in 2007. Until now I believed that a growth recession - i.e. growth of 2% - was the most likely scenario for the U.S. next year. But recent developments suggest to me that the probablity of an outright recession - or a stagflation-lite where output actually drops rather than slows down - are now, in my subjective view, as high as 50%. So, I do not now predict with high probability a recession but now believe that its probability has significantly increaed to around 50%. This increased risk of a U.S. recession is the outcome of the aggravation of the Three Bear trends - and other vulnerabilities - that I have been worrying about since last fall: higher oil prices having a stagflationary effect; a housing slump negatively affecting residential investment and housing; and higher core inflation forcing the Fed to raise the Fed Funds rate to 6%. <MORE>