Tags: Roubini | uS | Recession

Roubini Group: US Stands 50-50 Chance of Recession

Tuesday, 13 Dec 2011 08:19 AM

The United States stands a 50-50 chance of falling into a recession in 2012, Europe is doomed for one and China needs to brace for a hard landing, according to a report from Roubini Global Economics.

The United States should grow by up to 1.5 percent in 2012 but exposure to Europe, which remains mired in crisis, could throw the economy into negative territory.

"Our global growth baseline now includes a sharp slowdown in China, a recession in Europe and the risk of a mild downturn in the U.S. We forecast global growth of just 2.8 percent in 2012, moderating further to 2.7 percent in 2013," according to the research firm, headed by New York University economist Nouriel Roubini.
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Compared with the eurozone, "the U.S. looks more resilient (even the U.S. of 2008-09 would look more resilient…), but there are extensive downside risks to our baseline of 1.4-1.5 percent growth in 2012-13; thus we still see a 50 percent chance of an outright recession in the next year."

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Nouriel Roubini
(Getty Images photo)
The eurozone (EZ) economy should contract by 0.8 percent in 2012 burdened by a continued credit crunch, fiscal austerity and a likely Greek exit from the monetary union, the firm adds.

"Debt restructurings will deepen the contraction in 2013 as EZ leaders proceed with an incremental policy response that will buy time but not bring resolution to the crisis. Fiscal austerity in the EZ periphery as well as in the core could bring growth across the region all the way down to minus-1.8 percent in 2013, and a disorderly outcome to the crisis would lower EZ and global growth further."

While the U.S. is becoming less and less vulnerable to events overseas, it's not out of the woods yet.

"We have revised up our forecasts but do not dismiss the possibility of a mild recession in 2012, with plenty of downside risks from the EZ crisis, self-imposed fiscal drag, ongoing deleveraging in the household sector (amid weak labor income generation and persistent downward pressure on real estate and financial wealth), rising inequality and political gridlock."

European leaders wrapped a summit recently committed to better integrating fiscal policies in a more centralized fashion.

Up to now, eurozone countries operated under one Central Bank and with one currency but were largely free to tax and spend under their own fiscal policies.

Many experts agree the summit aims to prevent future crisis from rocking the European and global economies but won't put out the fires burning from the current one.

"The moves by the eurozone policymakers are not a damp squib but neither are they the big bazooka hoped for that could really ease market tension for an extended period," says Howard Archer, economist at IHS Global Insight, according to Reuters.

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The United States stands a 50-50 chance of falling into a recession in 2012, Europe is doomed for one and China needs to brace for a hard landing, according to a report from Roubini Global Economics. The United States should grow by up to 1.5 percent in 2012 but exposure...
Roubini,uS,Recession
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2011-19-13
Tuesday, 13 Dec 2011 08:19 AM
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