Tags: S&P | US | Recession | economy

S&P Sees Slower Growth, Chance of Recession at 20% to 25%

Friday, 21 Sep 2012 02:36 PM

Standard & Poor's sees the chance of a U.S. recession at 20 percent to 25 percent and lowered its economic-growth forecast because of recent disappointing jobs data.

The rating agency said it expects U.S. gross domestic product, or GDP, growth of just 2.2 percent this year and only 1.8 percent in 2013.

"Our expectation for the chances of another U.S. recession is about 20 percent to 25 percent," said Standard & Poor's Deputy Chief Economist Beth Ann Bovino. "Chances of a quick turnaround are around 15 percent."

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop. 

The poor labor market continues to keep the recovery in slow gear, spurring
Federal Reserve Chairman Ben Bernanke to take unprecedented action.

After its September Federal Open Market Committee Meeting, the Fed extended its guidance on interest rates, saying that it will keep rates low until mid-2015.

The Fed also initiated another round of quantitative easing, this time making the offer open-ended and tying it to labor market conditions.

"A strong economic recovery is likely a long ways away," Bovino said.

"Businesses have pulled back on hiring, with a monthly average of just 97,000 job gains over the past six months. That's well below the 240,000-plus monthly job gains we saw in the winter," said Bovino. "This gives us reason not to expect a revival in household spending any time soon."

Worries that taxes may jump next year if Congress doesn't reach a compromise on the fiscal cliff will also keep people cautious this year.

But for the more optimistic, there is some good news.

"The housing market, which has been a drag on growth since 2005, may finally be helping — not hurting — the recovery," said Bovino. "We expect residential investment to contribute to GDP growth in 2012, for the first time in seven years."

Even home prices, according to the S&P/Case-Shiller Home Price Index, may have found their bottom.

"Overall, we expect GDP growth to be about 1.5 percent (quarter-over-quarter, annualized) in the second half of the year, softer than the 1.85 percent pace in the first half of the year," S&P said in a report issued Friday.

The global economic slowdown, plus poor visibility on how things will turn out politically both here and abroad, will likely keep this recovery at a crawl.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop. 


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Standard & Poor's warned that it sees the chance of a U.S. recession at 20 percent to 25 percent and lowered its economic-growth forecast because of recent disappointing jobs data.
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Friday, 21 Sep 2012 02:36 PM
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