The US economy will slow sharply in the second half of the year and the risk of it going into recession cannot be ruled out, the OECD has warned.
The 30-nation group of top economies said the global financial fallout from the current US sub-prime mortgage crisis would continue for some time.
It is now forecasting economic growth to fall to 2% in the third quarter and 1.5% in the fourth quarter from the 4% recorded between April and June.
European leading economies are less vulnerable to a housing-led slowdown. This was because their mortgage markets had fewer structural "imbalances" while inflationary pressures were generally lower.
This environment, if it happens, is bullish for the financial markets as the global central banks try to revive the economies of the industrialized world.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
1 comment:
The financial complex poses a bit of a juxtaposition of (1) the benefit of lower interest rates v. (2) the come-to-Jesus discussion with shareholders regarding expected loan losses and loss of fee income. (Though I did pick up some FMD today. I think that the SLM deal will fall through, and FMD was hit very hard with news of that deal).
Loan delinquencies, as many a pundit has quipped, are at an all time low and employment is at an all time high. With the former at its nadir and the latter at its apogee as the two converge, that will spell trouble.
The problem to this observer is that when you are at peak cycle and the good stuff (employment, earnings) is high and the bad stuff (loan losses, unemployment)is low--there's no place to really go but to the mean.
Now reality is setting in---folks are finally realizing that when you have a sector (housing)stumbling that has contributed to much of the past economic recovery, it portends bad things for the economy. How any sane professional could say that this is "contained" is beyond me--but we've heard it day in and day out.
And the global economy...that story is well-worn and fraying a bit, too. Germany's numbers were weak and Japan's have been weak for the last quarter. Sure the emerging markets are moving, but when the industrialized nations are faltering, I don't believe that emerging markets can plug the hole that is bursting in the global growth story dyke.
Sorry to be so long winded!
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