From www.roubini.com: Double Dip Recession
Economist Nouriel Roubini has come out with yet another chilling prediction. Roubini warns that the chances of a double dip recession in the US have increased as the second half of the year is expected to be even worse.
The tailwinds of the first half of 2010 will become headwinds in the second half: The fiscal stimulus will turn into a fiscal drag; the inventory adjustment that boosted growth is done; and the base effects and the temporary Census hiring are gone.
Most components of aggregate demand will look worse in the second half of the year than in the first, possibly even worse than in Q2 2010; our baseline scenario now shows average real U.S. GDP growth at 0.9% in H2 2010 and at 2.5% for the year
“Compared to six months ago when the probability of double dip was very low, right now, I expect it to be very high,” Roubini warned.
Growth in Q2 has been revised downwards from 2.4% to 1.6%, given the construction numbers will be revised down to 1.2%,” he added.
He reasoned that based on the data the second half of the year is going to be worse than the first half 2 because all the tailwinds will become headwinds. He is concerned that if we finish Q2 with 1.2% then the second half will be worse.
“Once the growth rate is 1%, you are already in a growth recession, and then the risk is that the financial markets are going to have a downturn,” Roubini said.