Tags: Crandall | US | Economy | Shock

Forecaster Lou Crandall: US Economy Can't Withstand Strong Shock

By    |   Tuesday, 14 February 2012 01:26 PM

The U.S. economy is regaining some of its strength but isn’t prepared to withstand a strong shock, warns Lou Crandall, chief economist for research firm Wrightson ICAP.

Crandall described the economy to Market Watch as beginning the year in much the same position that it did last year: with growth rates close to the “escape velocity” that’s needed for growth to become self-sustaining.

Crandall told Market Watch that he is encouraged by some of the recent economic data, especially the surprising gain in the Institute for Supply Management's non-manufacturing index for January.

Reuters said the ISM report showed that the U.S. services sector unexpectedly accelerated in January to its highest level in nearly a year. The services index rose to 56.8 from a revised 53 in December, reports Reuters, adding that a reading above 50 indicates expansion in the sector.

While there are other positive signs, such as recent jobs data, the language coming from market watchers such as Crandall suggests that the economy is still in a fragile state.

Reuters quoted San Francisco Fed President John Williams as saying, “I'm sticking with my story that economic growth won't be that strong this year.”

Crandall also warned Market Watch that the there are a number of risks looming over the nation, ranging from rising gasoline prices to the unknown effects of a potential Greek default or other eurozone contagion.

“If we get lucky, we could stay on a modest growth path, which in time could be self-sustaining,” Crandall told Market Watch.

But, as Market Watch points out, last year we didn't get lucky. The nation was hit with a series of shocks and the economy lost its footing for much of the year.

Other experts agree that the United States is far from out of trouble just yet.

Cheery economic indicators such as improving consumer spending and falling unemployment rates merit applause but a look at the reality bolstering those numbers shows a still tepid economy, says Neel Kashkari, head of equities at Pimco, the world's largest bond fund.

"We see the headline economic numbers that look positive to the upside, which is great news but let's look underneath the surface," Kashkari tells CNBC.

"It's on the back of massive central bank intervention. The Fed said they're going to keep rates pegged to zero until at least 2014, that's a long time, massive monetary stimulus."

© 2019 Newsmax Finance. All rights reserved.

1Like our page
Tuesday, 14 February 2012 01:26 PM
Newsmax Media, Inc.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved