Double-Dip Recession Coming? Second Downturn Could Be Getting More Likely (POLL)
When Fed chief Ben Bernanke said last week that the economic recovery "won't feel terrific," he may have been on to something. Whether we're technically in a recession, these days it can be awfully hard for many Americans to see any semblance of a silver lining in the economy.
That may be because there's still a significant risk of America falling into a second recession. According to the Wall Street Journal, the latest round of economic news has raised concerns among the Federal Reserve's board of governors that the chance of a double-dip recession is increasing.
"...fiscal woes in Europe, stock-market declines at home and stubbornly high U.S. unemployment have alerted some officials to risks that the economy could lose momentum and that inflation, already running below the Fed's informal target of 1.5% to 2%, could fall further, raising a risk of price deflation."
As the WSJ notes, there's very little hope among the Fed's leaders that the unemployment situation will change any time soon: "I would be surprised if the national unemployment rate were to fall below 9% before the end of 2010 or below 8% by the end of 2011," Narayana Kocherlakota, Minneapolis Fed president, said Friday.
MarketWatch's chief economist Irwin Kellner is even more grim about the chances that our economy will suffer another prolonged downturn. May saw the first monthly decline in retail sales since last Fall, Kellner notes:
Since retail sales make up over half of all consumer spending, it is safe to say that at least one-third of the gross domestic product is now falling. It is also not a stretch to conclude that the rest of consumer spending, which is services, is soft as well.
Add to this the ongoing weakness in housing sales and new home construction, the slowing in exports as the dollar rises in world financial markets and the sharp cutbacks by states and local government, and most of the economy -- except for inventories -- appears to have stopped growing and may well be contracting.
In plain English, double-dip is back on the table.
CNN Money spoke to a handful of market insiders, all of whom agreed that the chances of a double-dip were rising. The experts put the chances of a double-dip recession between 20 and 30 percent. What do you think?