Monday, August 30, 2010

What is a Double Dip Recession

With U.S. housing sales last month declining 27 percent from a month ago and the American economy growing less than expected in the second quarter, fears over a double-dip recession are spreading. The term “double dip,” which was created in the U.S. in 2001, refers to an economy falling into recession again after showing brief signs of recovery. Two pillars of the conventional economic cycle are a V-shaped fast recovery after a downturn and a slower U-shaped recovery. Unlike these two patterns, a double dip shows a W-shaped recovery.New York University economist Nouriel Roubini, who foresaw the global financial crisis, predicts a 40 per cent probability of a double dip Recession.US growth would be well below 1 per cent in the third quarter as economic “tailwinds” in the first six months of the year became “headwinds” in the second half of the year, Nouriel Roubini told Bloomberg last week.

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