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According to USA Today's most recent
economic outlook survey, "Economists
See Growth Slowing, Recession Risk Falling," the
majority of experts are cautiously optimistic:
- The
risk of another U.S. recession is falling. The median estimate
of USA TODAY's panel call it only a 22% probability in the next
12 months.
- Europe's
financial crisis will shave only a quarter of a percentage point from
this year's U.S. growth, the economists said.
- More
than 90% of the economists think home prices have either already
bottomed out or will by the end of this year.
And yet, as
John Hussman notes in this week's Hussman Funds' Weekly
Market Comment, "Warning: Goat Rodeo," the
hard data paints a much less sanguine picture of the risks ahead.
While we
typically discourage drawing inferences from any single indicator, it's at
least worth noting that with the release of Q4 GDP figures, the
year-over-year growth rate of real U.S. GDP remains below 1.6% (denoted by
the red line below). A decline in GDP growth to this level has always been
associated with recession, usually coincident with that decline, though with
a two-quarter lag in two instances (1956 and 2007), and with one
post-recession dip in growth during the first quarter of 2003. As it happens,
the GDP growth rate dropped below 1.6% in the third quarter of 2011.
Given the strong and rather obvious relationship between the most recent
year-over-year rate of GDP growth and the prospect of oncoming recession,
it's difficult to understand why Wall Street so completely rejects the
likelihood of an economic downturn.
Because
this time it's different?
LOL!!
Michael J. Panzner
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