Tags: Goldman | US | Recession | Europe

Goldman’s Hatzius: US Recession 'Certainly Possible' if Europe Crisis Deepens

Tuesday, 20 Dec 2011 02:41 PM

The U.S. economy looks to repeat its 2011 performance next year by posting lackluster growth rates, says Goldman Sachs chief economist Jan Hatzius. But he warns that a U.S. recession is "certainly possible" if "things were to get worse in Europe."

The good news is the country will likely avoid recession, with the chance of dipping back into contraction standing at 40 percent, Hatzius says.

"I wouldn’t go so far as to say we've dodged a bullet" on recession in the U.S., "but the risk has come down in the last couple of months to a degree," he tells CNBC.
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U.S. gross domestic product should grow between 1.5 percent and 2 percent in 2012, while stock-market performance will come in muted.

"We think earnings per share will be roughly flat in 2012, in line with the relatively muted economic environment," says Hatzius.

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(Getty Images photo)
"We do expect more of a drag from Europe on the U.S...and if things were to get worse in Europe, a recession in the U.S. is certainly possible."

Federal Reserve officials also point out the economy is due to continue recovering next year although at an unexciting clip, with inflation on the rise but within comfort zones.

"The macroeconomic experience of 2011 provides vivid illustration. Despite large-scale efforts to provide more monetary stimulus, growth has disappointed and inflation has ratcheted upwards," Richmond Federal Reserve Bank President Jeffrey Lacker told the Charlotte Chamber of Commerce, according to Reuters.

Lacker added he opposed unleashing further stimulus measures on the economy, such as quantitative easing, which are asset purchases from banks.

"I'm hard pressed to see the rationale for further monetary stimulus," Lacker said, adding growth should come in around 2-2.5 percent.

Bank of America Corp. Chief Executive Officer Brian T. Moynihan has also warned that 2012 will be another year of slow economic growth.

Consumers continue to increase spending, which is “modestly encouraging,” Moynihan, 52, said recently at an economic outlook conference held in Charlotte, North Carolina, where the company is based.

Employment will remain a challenge for next year, he said. “It’s all about jobs,” Moynihan said.

The U.S. economy will slow to 1 percent annualized growth by the end of next year as Europe enters recession, according to a report last week from Bank of America economists.

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The U.S. economy looks to repeat its 2011 performance next year by posting lackluster growth rates, says Goldman Sachs chief economist Jan Hatzius. But he warns that a U.S. recession is certainly possible if things were to get worse in Europe. The good news is the...
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2011-41-20
Tuesday, 20 Dec 2011 02:41 PM
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