Is US heading for a double dip recession ?
US has so far been able to keep it’s head above waters in the last two quarters, thanks to the massive trillion dollar stimulus spending. And in the coming months, all these schemes are coming to an end one by one.
First, the housing credit scheme will be out next month, due to which there could be a big crash in home sales from June month onwards. That could in turn pull down the demand for labor, cement, steel, electronic items etc.,
The home seizures are continuing at record pace, which means more second hand homes will hit the market, when the demand will be going down. Is that not a good combination for a big fall in average home sale prices ?
The unemployment continues to be very high, and the European union crisis is only accentuating fears in the corporate sector minds about the need to keep the labor force trim. So expect more job cuts in major industries in the coming weeks and months, which can add to the unemployment problem.
The European zone exports to US is increasing thanks to the weakening European common currency, and that means lower imports and internal production in US.
The crude oil spill can only be the last nail in the coffin, as further oil exploration projects will be put on back burner, meaning lower job creation in a prospective sector. Then you have the forced need on the US government to cut the massive budget deficit, for which they have to increase taxes. That would only put more pressure on jobs and corporate sector demand.
So expect a double dip recession in US in the coming year, for which the seeds would be sown in the coming months.
