Tags: krugman | recession | over

Krugman: Recession Over, Recovery Fuzzy

By Marc Davis   |   Wednesday, 23 Sep 2009 09:27 AM

That resounding thud you just heard was probably the global economic downturn hitting bottom.

But don't expect a big, rapid bounce back, says Paul Krugman, Nobel Prize-winning economist, quoted in a Bloomberg report.

"The end of the world appears to have been postponed," said Krugman at a recent Helsinki seminar.

Although the world economy is still troubled, according to Krugman, "...it does not appear to be falling into an abyss."

Nevertheless, future economic prospects are uncertain, and the shape of the anticipated recovery is "very fuzzy," Krugman is quoted as saying.

The recession ended last quarter in three major foreign economies –– France, Germany and Japan –– suggesting that world economies are climbing over the hump, in Krugman's analysis.

"The U.S. recession probably ended in late July or August after gross domestic product fell 1 percent in the second quarter from the prior three months."

But don't count on China, Krugman warns. China's economy may not have enough steam to be "a locomotive of recovery."

While Krugman's outlook may be faintly optimistic, he urges the U.S. not to pull the plug on support measures yet.

"Exit from stimulus should certainly wait until we have clear signs that we're closing the output gap."

The U.S. stock market has also showed signs that the worst is over.

Open short interest in the NYSE – the amount of outstanding short sales of stock not yet closed by repurchase – is substantially down, reports The Wall Street Journal. Analysts and investors regard this as a strong bullish indicator.

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That resounding thud you just heard was probably the global economic downturn hitting bottom. But don't expect a big, rapid bounce back, says Paul Krugman, Nobel Prize-winning economist, quoted in a Bloomberg report."The end of the world appears to have been postponed,"...
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2009-27-23
 

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