The Telegraph ^ | 7/16/2012 | Ambrose Evans-Pritchard
The Economic Cycle Research Institute in America has doubled down on its recession call. A fresh US slump is not just a risk any longer. It has already begun.
Output slowed to stall speed over the winter. The US economy tipped into outright contraction in the second quarter, even before facing the "fiscal cliff" later this year – tightening of $600bn or 4pc of GDP unless action is taken to stop it.
Nothing serious is yet being done to head off the downward slide. If ECRI is right, the implications for the global system are ugly.
It is never easy to read the signals at inflexion points. Washington is always caught off guard. As ECRI’s Lakshman Achuthan says, it took the Lehman collapse ten months into recession in September 2008 to "wake people up".
What we know is that retail sales rolled over in February and broader trade sales peaked in December. Industrial output peaked in April. The nationwide ISM index of manufacturing crashed through the break-even line of 50 in June, just as it did at the onset of the Great Recession in late 2007, but this time at a faster pace.
Job growth has slumped to 75,000 a month over the last three months, too low to stop unemployment rising again to 8.2pc, or 14.9pc on the wider U6 measure.
Albert Edwards from Societe Generale expects the US economy to shrink 2pc this year, leading to a 40pc fall in profits. He says the S&P 500 index of stocks will ultimately plumb fresh secular depths, below the 666 bottom of March 2009.
The Federal Reserve has drifted into fatalism, seeming to lose confidence in its own ability to shape events, displaying the same lack of "Rooseveltian resolve" as the Fed in the early 1930s
(Excerpt) Read more at telegraph.co.uk ...
