Thursday, October 20, 2011

Pay Attention to Europe

Every couple of weeks, we mention the European mess.  Here, Pethokoukis quotes Barclay's.

Our baseline forecast assumes that policymakers will prevent the turmoil in Europe from leading to a full-blown financial crisis similar to 2008 and that US policymakers will not impose excessive fiscal tightening starting in 2012. If, by contrast, either of these risks is realized, the potential for another recession will increase substantially. a recession scenario, house prices, as measured by the CoreLogic headline index, could decline another 7% in 2012 . … The scenario posits declining real GDP for four consecutive quarters, with Q2 12 having the deepest decline at 6% (q/q saar)

...Real disposable personal income also declines for four consecutive quarters, albeit with a one-quarter lag relative to the decline in GDP, and the unemployment rate moves  persistently higher, peaking at 12.1% by the end of our forecast horizon.

Other than that, things will be just fine and dandy!

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