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The worst recession since WWII, says Capital Economics
Perennial bears Capital Economics have predicted that the current recession will be the worst since World War Two.
The leading economists at Capital Economics, Roger Bootle and Julian Jessop, have been pilloried for their perennially negative prognoses on the world's economy for years, but of late their predictions have started to come true.
Fresh from being vindicated on their predictions that the housing market will slip significantly the group has now said that the latest round of data received over recent days leads them to believe the current recession will be even worse than they first thought.
Jessop said: 'Our growth forecasts had already been at the very low end of the range, but the incoming data has convinced us that the world economy is heading for its worst recession since World War II. Needless to say, this underlines our view that global commodity prices and interest rates have further to fall, and that it is far too soon to sound the all clear on riskier assets - including equities.'
Jessop described the market as experiencing a hangover from the credit excesses of the past decade. 'The financial crisis is far from over and bank lending will be constrained for years. The destruction of wealth has been little short of catastrophic and consumers, especially in the US and in the UK, need to rebuild their savings at the expense of spending.,' he said.
Jessop argues that the economies likely to recover first from the crisis will be those within the Eurozone and Japan. These could recover by 2010. For the UK however 2009 in particular will be a tough year with a contraction of 1.5% expected in the economy, a figure which Jessop believes will be broadly in line with the United States.
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