ECRI’s Achuthan: Recession Pain to Kick in by Year’s End

Thursday, 10 May 2012 12:41 PM

By Dan Weil

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A recession will begin by the middle of this year, says Lakshman Achuthan, co-founder of the Economic Cycle Research Institute (ECRI). But it won’t be clear that the downturn has started until year-end, he says.

“In the last six recessions, it wasn’t until six months after the recession that you saw a negative print of GDP,” Achuthan tells Yahoo.

Last fall, the ECRI forecast that a recession was imminent. “The timing of a recession, as many researchers smarter than I have pointed out, is probably the toughest question in economic forecasting,” he says.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

While ECRI doesn’t reveal what’s in the indices of leading indicators that it uses to formulate its projections, Achuthan feels confident about the recession call.

He notes that two consecutive quarters of negative GDP growth aren’t necessary for a recession. “Recession is a process where you have job losses, income gets weak, sales get weak, and production falls, which includes GDP and industrial production.”

ECRI expects this recession to be mild. “The caveat is if something really happens – a shock,” Achuthan says.

“Say there’s a Lehman-size event in the market. Then a relatively mild recession can get a lot worse.”

Billionaire investor Wilbur Ross says fiscal paralysis in Congress may push the economy into recession next year.

“That’s too big a hit for the economy to take,” Ross tells Bloomberg. “We’re going to have another freak show [over spending and taxes] at the end of the year.”

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.





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