Many economists are worried about the threat of a double-dip recession, and now you can count Pimco Chief Investment Officer Bill Gross as one of them.
The government reported that second quarter GDP growth totaled 2.4 percent. That’s already down from 3.7 percent in the first quarter.
And Gross and others expect the second quarter number will be revised downward to account for the whopping $49.9 billion trade deficit in June, which was announced after the first GDP estimate was released.
The trade figure implies second-quarter GDP growth of between 1 percent and 2 percent, Gross tells The New York Times.
“That implies that the momentum of the economy from the first to the second quarter was downhill, and therefore we think it’s quite possible that we might actually be somewhere between zero and 1 percent — in other words, very close to a double-dip recession.”
Like his Pimco colleague Mohamed El-Erian, Gross puts the chances of a double-dip recession and deflation at between 25 percent and 35 percent.
Similar to the bond giant, investment bank Goldman Sachs economists see the double-dip risk at between 25 percent and 30 percent.
The reason why the odds don’t favor another recession outright is that the economy already is so bad that it can’t get much worse, they wrote in a report obtained by several news organizations.
“Several key components of private-sector activity have already fallen to levels that are quite low relative to historical averages or underlying fundamentals."
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