Odds Of Recession In 2012 Increase

Not so good economic news from the Federal Reserve:

The European debt crisis is raising the odds of a U.S. recession, with economic contraction more likely than not by early 2012, according to research from the San Francisco Federal Reserve Bank.

While it is difficult to gauge the odds precisely, an analysis of leading U.S. economic indicators suggests a rising chance of a recession through the end of the year and into early next year, researchers at the regional Fed bank wrote on Monday. The risk of recession recedes after the second half of 2012, they found.

New governments in Greece and Italy, with fresh promises to tackle fiscal problems have in recent days, allayed investor concerns about a near-term sovereign debt default in the euro zone, but Europe’s debt crisis is far from resolved. The region is facing its worst hour since World War II, German Chancellor Angela Merkel said on Monday.

Although domestic threats to economic growth in the United States are limited, a shock from abroad could derail a fragile recovery.

The weak U.S. economy is more than usually vulnerable to turbulence beyond its borders, as the unexpectedly severe U.S. effects from Japan’s devastating earthquake in March demonstrates, the researchers said.

“A European sovereign debt default may well sink the United States back into recession,” wrote Travis Berge, Early Elias and Oscar Jorda in the latest San Francisco Fed Economic Letter. “However, if we navigate the storm through the second half of 2012, it appears that danger will recede rapidly in 2013.

Looks like it’s going to be a rough 2012.

 

FILED UNDER: Economics and Business, Quick Takes, US Politics
Doug Mataconis
About Doug Mataconis
Doug Mataconis held a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020. He passed for too young in July 2021.

Comments

  1. ponce says:

    And all the Republican candidates just said Europe’s problems are of no interest to them.

  2. Hey Norm says:

    All of Europe is involved in an austerity cluster-f***. Spains austerity is hurting France and Italy. French austerity is hurting Spain and Italy. Everyone’s austerity is killing Portugal. Germany is OK…but with everyone else implementing austerity budgeting…it won’t take long before demand-shock starts a recession there.
    I’m pretty sure the solution is to send some GOP politicians and pundits over there to explain to them that it’s about uncertainty…and not a lack of demand for their exports.

  3. Steve Verdon says:

    Yes, they are facing a sovereign debt crisis so naturally what is needed is more debt!