Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/money/article/a427274
Q&A: Can any data predict the next recession?
The flow of economic data has painted a downbeat picture, but can any of it really be used to predict a 'double dip'?
Prev Close:
More FTSE charts & pricesPrev Close:
More FTSE charts & pricesPrev Close:
More FTSE charts & pricesby Deborah Hyde on Sep 08, 2010 at 00:01
Economic news flow is increasingly downbeat but can any data really predict a 'double dip'?
Why is everyone worried about the economy again?
In recent weeks there has been growing evidence that the far better than expected economic growth in the second quarter of the year was a blip.
Last week's CIPS/Markit reports on manufacturing, construction and services came in lower than forecast and point to only very modest growth in the UK economy in the third quarter.
Jonathan Loynes, chief UK economist at Capital Economics, believes that may have been the first sign that a second recession is already on the way.
‘It’s just possible that it will turn out to be the week when the threat of a renewed recession - or 'double-dip' - in the UK economy first started to look very real,’ he said.
Data from the US is also looking increasingly downbeat (See chart below).
I heard double dips are extraordinarily rare...
Some people suggest there has only ever been one double dip. Since the second downturn in the US back in the early part of the last century came a whole three years after the first recession many people think the only real double dip was in the US in the early 80s.
And few people believe a double dip is on the cards now with most commentators suggesting the likelihood is somewhere between 15- 40%.
But with forward looking data such as surveys, investment and new orders and recruitment plans showing that the pace of the economic recovery is slowing, few are willing to rule it out completely.
Nouriel Roubini,dubbed a ‘prophet’ because he predicted the collapse of the US housing bubble, now says there is a 40% chance the US will fall back into recession.
Tools from Citywire Money
More about this:
More from us
- Nouriel Roubini: The US consumer will drag us back into recession
- Leading fund manager Gibbs slashes cash and sells out of gold
- UK economy grows even faster than previous estimate
- Are you buying shares?
What others are saying
- What are leading, lagging and coincident indicators?
- About PMIs
- What does an inverted yield curve signify?
- OECD Composite leading indicators
- The stock market as a leading indicator
- NIESR monthly GDP data
- CBI surveys
- Office for National Statistics
Archive
Today's articles
- FTSE slips on Greek deal; Reckitt Benckiser tops index
- Safe havens in short supply, and only China can help
- Chart of the Day: China, an economic miracle no more
- Diary of a Top Stocker: 5 quality blue chips I've got my eye on
- The ISA explained once and for all
- You need to take responsibility for your long-term care
- Liontrust takes another bite of Brooks Macdonald
- 5 things the Money Advice Service can teach savers
From the Forums
- How best to access a pension tax-free lump sum?
- Only BT can really benefit from high speed nationwide broadband
- You can’t evict me for not paying rent - it’s against my human rights!
- Lets out the dogs....................starting with SLI UK Equity unconstrained losses
- Is BSkyB potentially another Kodak?
4 comments so far. Why not have your say?
Tony Peterson
Sep 08, 2010 at 15:50
Economic data is based on the past. This is no guide whatsoever towards a future that is governed by intrinsically chaotic events. It is of no more use in predicting the future than the so-called biblical Book of Revelations.
report thisWilliam Bishop
Sep 08, 2010 at 15:56
Clearly, when there is talk of a double dip when interest rates remain at rock bottom, plus quantitative easing et al, we would be on an entirely different road map from the whole of the post-war period, with no satisfactory analogy with the past possible. My inclination remains in the direction of a sluggish recovery, but we are all guessing to an even greater extent than usual.
report thisDan Tubb
Sep 08, 2010 at 17:43
Austrian economist (perhaps Peter Schiff is the most well known example) had no problem predicting the last recession, the cause the after effects, and can still predict where we go from here. But Austrian economists are not advocating ever larger government, so nobody wants to listen to them.
report thisJohn Harfitt
Sep 09, 2010 at 08:37
WAKE UP!!!!!!!!!
The UK has the highest external debt relative to GDP (400%+) of any industrialised country in the World.
The previous decades were built on debt - Government borrowing 1 in every 4 pounds that were spent. Re-mortgaging of overpriced properties to spend on lifestyle products. Credit cards and personal loans maxed out and not repaid.
etc etc.
All of that debt has to be repaid by someone. The solution is NOT to add more debt to the pile.
The UK has got used to buying cheap goods from so called Third World Countries - as a result we don't bother to make much these days. In any case we could not compete.
So - no more easy credit - no jobs for a large proportion of the population.
The Government employing millions and supporting millions more - pensioners expecting to be paid a pension for around 25 years - None of this is sustainable.
The Western Empire led by the US economic model is finished.
We are facing a substantial drop in our standards of living - there is only so much wealth in the World as a whole - if the so called Third World countries are having more then we must have less - it is a nil sum game.
Thank God I am a pensioner - the future is no less than frightening!
.
report thisleave a comment
Please sign in here or register here to comment. It is free to register and only takes a minute or two.