Ominous warning from US
The chief economist for big US investment house BNY Mellon has warned that the US will experience either a growth recession or a full-scale recession, with a growth recession regarded as more likely.
BNY Mellon chief economist Richard B Hoey has used his latest economic update to warn that over the past year US monetary policy has only been tight for one key sector of the economy — the troubled housing sector.
He said that as a result, despite the housing recession, non-housing economic growth has been running at an above-trend pace over the past year, and that BNY Mellon expects a substantial upward revision to the advance estimate of real gross domestic product growth in the US for the third quarter.
“This revision should reflect stronger exports and increased inventory accumulation, with much of the reported economic strength attributable to fundamentals prevailing prior to the emergence of major financial stresses,” Hoey said.
However, he said that the strength was not being sustained, as financial stresses linked to the housing recession and further house price declines were beginning to weaken domestic demand.
“The key issue will be whether the US will experience a growth recession or a full-scale recession,” Hoey said. “We believe that a growth recession is somewhat more likely”.
AUTHOR
Mike Taylor
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