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More doom awaits the US economy
Tue, 2 Feb Pre-Open

Nouriel Roubini is back to doing what he does best: predicting more gloom for the US economy. And we know that he has been accurate in his predictions in the past. In fact, the noted economist in 2007 had correctly predicted a 'hard landing' for the US economy. What followed thereafter is well entrenched in the annals of history.

This time around, Roubini maintains that US growth outlook remains 'very dismal'. This is despite the fact that there have been some signs of recovery evident in the global economy. As reported on Bloomberg, Roubini believes that more than half of this growth was related to a replenishing of depleted inventories. Therefore, that consumption was reliant on monetary and fiscal stimulus. And so, he says, as these measures recede, the growth rate will slow down in the second half of 2010.

His view is reiterated by Lawrence Summers, a former US Treasury Secretary. Summers believes that the US GDP growth will continue to grow at a moderate pace. His biggest concern is the rising unemployment in the economy which stands at 10% currently. The stimulus packages announced by the Obama administration have to a certain extent perked up growth. But it obviously has not been enough to improve the employment scenario.

So far, the US government has not been able to come out with any concrete solution to this very difficult but important problem. And all this at a time when a debate has already started raging about the timing of exiting the stimulus measures. US' gargantuan deficit position means that its government will have to take a call soon on when to start exiting these measures. Otherwise, the debt situation is most likely to spin out of control.

But the stubbornly high unemployment rate means that the exit measures are more likely to introduced later rather than sooner.

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