Obama-Clinton Battle, McCain’s N.H. Surge Greeted by Merrill Lynch With News that Recession “has arrived”

January 9, 2008
BBC News

While the rest of the world was being put to sleep…ooooops….. I mean “mesmerized” by electoral developments in New Hampshire, David Rosenberg was busy writing the next President’s script. Rosenberg, the widely respected chief national economist at Merrill Lynch, is the author of a report announcing that a recession “has arrived”.

And though our worsening economic woes are hardly news to even the most brain dead among us , it should give greater urgency to whomever comes out of New Hampshire with an eye on the hot seat of empire this November. This is, in no small part, because they will likely have to take immediate, urgent measures to deal with the cloud of recession descending on the U.S. This BBC story highlights a report by financial giant Merrill Lynch, which states that a recession “has arrived”.

Instead of waiting for slothfully slow and arcane body known as the National Bureau of Economic Research to officialize this predictably bad economic news, Merrill fired off a warning that has global markets scurrying for cover.

Meanwhile, the rest of we humans remain vulnerable to the showers of acid economic rain: rising oil prices, the sub-prime mortgage crisis and a flaccid dollar (On the D train yesterday, I sat next to some shopping bag-bearing Brits I jealously watched as they gabbed about the jumbo jet-fulls of goods just purchased here in the new Tijuana of the Hudson, NYC).

After Iowa and New Hampshire, I’m pretty charisma’d hoped and change’d out and am instead staring at the tea leaves and tatters of Wall Street in search of what the future holds.

BBC
Recession in the US ‘has arrived’

The feared recession in the US economy has already arrived, according to a report from Merrill Lynch. It said that Friday’s employment report, which sent shares tumbling worldwide, confirmed that the US is in the first month of a recession.Its view is controversial, with banks such as Lehman Brothers disagreeing.

But a reserve member of the committee that sets US rates warned that it could do little about the below-trend growth expected in the next six months.

“I am concerned that developments on the inflation front will make the Fed’s policy decisions more difficult in 2008,” Charles Plosser, president of the Federal Reserve Bank of Philadelphia said.He was referring to the problems faced by the US Federal Reserve, which might want to cut interest rates to avoid a recession, but is worried about inflationary factors such as $100-a-barrel oil. ‘Significant decline’ An official ruling on whether the US is in recession is made by the National Bureau of Economic Research, but this decision may not come for two years.The NBER defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months”.It bases its assessment on final figures on employment, personal income, industrial production and sales activity in the manufacturing and retail sectors.Merrill Lynch said that the figures showing the jobless rate hitting 5% in December were the final piece in that puzzle.”According to our analysis, this isn’t even a forecast any more but is a present day reality,” the report said. ‘Actual downturn’ But NBER president Martin Feldstein denied Merrill’s claims.”I think we’re not in a recession now,” he told CNBC.”But I think there is a serious risk that it could get worse and we could see an actual downturn,” he added.Merrill said that the current consensus view on Wall Street that there is a good chance of avoiding a recession is “in denial”.

It also objected to the use of euphemistic terms for the state of the economy.

“To say that the backdrop is ‘recession like’ is akin to an obstetrician telling a woman that she is ‘sort of pregnant’,” the report said.

Housing figures

There were further signs of the housing slowdown that has sparked off the problems in the US economy in home sale figures.

Pending sales of existing homes fell 2.6%, according to the National Association of Realtors, which saw its pending sales index drop to 87.6 in November, 19.2% below the point it was at a year ago.

The figures were better than expected, however, because October’s index reading was revised upwards from 87.2 to 89.9.

One Response to “Obama-Clinton Battle, McCain’s N.H. Surge Greeted by Merrill Lynch With News that Recession “has arrived””

  1. Ron Holland Says:

    I believe Merrill Lynch is correct about the arrival of recession in the United States. The housing downturn is negatively impacting property sales in second home communities in Florida. This is also slowing sales in NC mountain resorts that depend on Florida buyers.

    Still the downturn in prices and building of inventories is starting to attract second home buyers from Florida looking for cool temperatures in our mountains. Also the dramatic decline in the dollar combined with weakness in American real estate markets are beginning to attract bargain hunting European investors.

    Ron Holland, Broker/Realtor with Wolf’s Crossing Realty. See http://www.ronaldholland.com Ron markets resale mountain and ski resort properties in NC in Wolf Laurel and The Preserve at Wolf Laurel.


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