Vincent Fernando, CFA
Aug 13, 2010
If you haven’t seen it already, I highly recommend this interview with Nouriel Roubini. Particularly he raises the point that while the U.S. may not technically double-dip into a new recession, it’s going to feel like it is.
There will be a significant slow-down of growth in the second half of the year, especially since many forms of U.S. stimulus from the first half of 2010 won’t be around in the second half.
His view: There will be 1.5% U.S. GDP growth in the second half of 2010, and 1.5% GDP growth for 2011.¬†
“1.5% growth is not a double-dip recession, but it’s damn close to it because potential GDP growth is closer to 3%”
At this level of growth… home prices won’t stabilize and will fall further.
“Even at 1.5%, it’s going to feel like a recession even though technically it’s not a recession.”
I would only add the question, ‘for whom?’.
For masses of Americans, it will indeed feel like a recession, and on a personal level it will basically be one if they aren’t employed and are under substantial financial strain. For the luckier Americans out there, likely a minority, it will be a recovery, as it already has been for many. I think Roubini’s words bring up an interesting distinction we need to make when considering whether the economy is ‘good’ or ‘bad’. For who? And for what purpose?
1.5% U.S. GDP growth might be ugly for many Americans, but for others it could be just fine. For many companies, it could also be just fine. In addition, from a global growth perspective, which is the stance we personally are most concerned with given our locale outside of the U.S. and simply as a global investor, 1.5% U.S. GDP growth would also be enough to keep the world churning forward with decent global growth, even if for many Americans the situation would remain dire. This isn’t to say that their situations should be ignored, it’s just that the idea of a ‘good’ or ‘bad’ economy always needs to be framed in regards to what your goal or purpose is. From a global investor’s perspective 1.5% U.S. GDP growth is a recovery, even if from an unemployed person’s perspective in Detroit it’s nothing of the sort. That’s how the economy can be good and bad at the same time. Anyhow, without further ado, the video:
This article was posted: Friday, August 13, 2010 at 9:17 am