Economists do make varied estimations, and some are rosy and others not. Recent data from the economy indicates a double dip recession, where the economy starts to improve after a fall, then plunges again before settling, is more likely than previously thought. European analysts also as Wall Street are thinking it might happen, and the fallout could be just as global.
Moody’s says second dip possible
Moody’s, the credit rating agency, has put the chances of a second dip at 25 percent, up from their previous estimates of 20 percent, in a report by Moody’s Analytics. 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 real estate market should stabilize in 2012, should that happen. It is also estimated the economy will shrink a further 5 percent if it should come to pass.
Federal Reserve doesn’t smell roses either
The Federal Reserve doesn’t exactly think wine and roses are in the near future either. As outlined by 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.
Slower world recovery
If a double dip recession happens, it will be global in scope. There could be effects of a double dip felt across the Atlantic as well. Given that the trade deficit is wider than ever, there is an indication that America, as a whole, is producing fewer goods for export. That is less cash from foreign markets coming in. Coupled with a troubled housing market, these indicate a very slow recovery at best.
Additional reading
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
