Goldman Says Recession Menace Rising-00-5374

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Goldman Sachs, which simply seven months in the past was the loudest voice for a more potent than expected U. S. Recovery, now expects U. S. Output to creep forward at a snaillike number one. 5% clip in the moment quarter and a lower than energetic 2% in the 3rd.

Friday's call stands as fairly a comedown for economist Jan Hatzius, who in May forecast a 2% enlargement in the moment quarter and a three. 25% acquire in the 3rd quarter numbers that themselves represented a retreat from the firm's bullish begin-of-the-yr forecast.

A forecast downgrade alone does not spell financial downturn, in fact, but there may be ample reason to suspect a deeper malaise is at work: Consumer confidence fell "off a cliff" last month, Bank of America economist Joshua Dennerlein wrote in a word to clients Friday, dropping virtually 20% in the most up-to-date reading. That places the patron sentiment index at a degree last seen in 2009, when Citi (C) was assumed to be bankrupt and the stock market fetched half its present charge.

Dennerlein needs accountable that plunge at the debt ceiling debacle, but Hatzius notes much less ...
... soothingly that final gross sales rose at a sub-tepid 0. 5% clip in the first half. That is virtually at all times an indication of business contraction, even when nuts in Washington are not looking to blow up the financial system for the sake of showing "fiscally accountable. "

Double dip, right here we come.

"There is only one precedent in the postwar era for such weak demand increase out of doors the instant vicinity of a recession," Hatzius writes.

Although we do not end up with an financial downturn, slower increase capacity unemployment will {attention publishers: Although higher for longer -- which will make it onerous to tell the distinction. Goldman now expects joblessness to fall simply slightly by way of the top of next yr, to 8. 75% from a up to date nine. 2%. Although this yr the firm was predicting finish-of-2012 joblessness of 8. 25%, which is not exactly one thing to have a good time but if truth be told looks fairly excellent now.

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