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The Recession Will End… in Six Months (End of 2009)


recession_ends_six_monthsBy Marie Wiltz ⋅ 3:21 pm June 30, 2009

Recessionwire.com

“In a clear sign that the economic winds have shifted, our recession model puts the latest probability of recession two quarters from now at 37 percent—down significantly from the 80 percent readings earlier this year…the results suggest economic recovery is likely in six months…our outlook is that the recovery will begin in the third quarter of this year.” Wachovia Economics Group

Why it might be false: Who are they to say? Wachovia itself won’t be around much longer as it’s absorbed bit by bit into Wells Fargo. But back to the data: The Wachovia prediction relies on an increase in consumer spending to support economic recovery. This is a tricky approach given that figures the Commerce Department released late last week indicate that consumers are actually trying to live within their means and are thinking about their future financial well being, i.e. pocketing income increases and setting new record of savings highs in 15 years.  With this sudden surge of consumer responsibility, any projection based largely on consumer spending is shaky at best.

Why it could be true: While this prediction is slightly more optimistic than other ones we’ve recently cited, Wachovia isn’t alone in projecting economic expansion in the second half of 2009. Other organizations like The World Bank, Federal Reserve and National Association for Business Economics are also predicting recovery this year.

Our call:  We would love for the recession to be over in six months, but any recovery would be no more than mild considering remnants of the housing, credit and employment bubbles are still getting sorted out. We don’t doubt that people will eventually forget the scare of this prolonged recession and start living beyond their means and forgetting that they will need to retire again, but it’s going to be a while for that to happen.

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This entry was posted on Thursday, July 2nd, 2009, 5:43 am and is filed under Mixed Economy. You can follow any responses to this entry through RSS 2.0. You can leave a response, or trackback from your own site.

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