Roubini- We’re Not Even Close to a Robust Recovery

[n2doc]

Here are five reasons why.
By Nouriel Roubini|Posted Sunday, July 22, 2012, at 7:30 AM ET


While the risk of a disorderly crisis in the eurozone is well recognized, a more sanguine view of the United States has prevailed. For the last three years, the consensus has been that the U.S. economy was on the verge of a robust and self-sustaining recovery that would restore above-potential growth. That turned out to be wrong, as a painful process of balance-sheet deleveraging—reflecting excessive private-sector debt, and then its carryover to the public sector—implies that the recovery will remain, at best, below-trend for many years to come.

Even this year, the consensus got it wrong, expecting a recovery to annual GDP growth of better than than 3 percent. But the first-half growth rate looks set to come in closer to 1.5 percent at best, even below 2011’s dismal 1.7 percent. And now, after getting the first half of 2012 wrong, many are repeating the fairy tale that a combination of lower oil prices, rising auto sales, recovering house prices, and a resurgence of U.S. manufacturing will boost growth in the second half of the year and fuel above-potential growth by 2013.

The reality is the opposite: For several reasons, growth will slow further in the second half of 2012 and be even lower in 2013—close to stall speed. First, growth in the second quarter has decelerated from a mediocre 1.8 percent in January-March, as job creation—averaging 70,000 a month—fell sharply.

Second, expectations of the “fiscal cliff”— automatic tax increases and spending cuts set for the end of this year—will keep spending and growth lower through the second half of 2012. So will uncertainty about who will be president in 2013; about tax rates and spending levels; about the threat of another government shutdown over the debt ceiling; and about the risk of another sovereign rating downgrade should political gridlock continue to block a plan for medium-term fiscal consolidation. In such conditions, most firms and consumers will be cautious about spending—an option value of waiting—thus further weakening the economy.

more

http://www.slate.com/articles/business/project_syndicate/2012/07/five_reasons_why_we_aren_t_even_close_to_a_real_recovery.html

[xchrom]

1. du rec. nt

[DCBob]

2. Who said the "U.S. economy was on the verge of a robust and self-sustaining recovery" ??

I dont think anyone said that much less a "consensus".