By David Magee: Subscribe to David's RSS feed
February 26, 2012 4:47 PM EST
Americans finally got a break in the last half of 2011, and in the early months of 2012, when the recession economists had said officially ended some two years before seemed to grudgingly relinquish its grip.
The U.S. economy began to grow, albeit at a slow pace. The problematic unemployment rate fell below 9 percent. Manufacturing perked up. Consumer confidence began to rise. New housing starts found a bit of momentum. And, domestic stock markets soared, with the Dow Jones Industrial Average recently hitting its highest mark near 13,000 since May 2008 -- just before it was pummeled by the Great Recession.
Meanwhile, the European debt crisis, which has threatened to derail momentum in the U.S., has stabilized as much as can be expected for the moment.
So why is one professional observer so negative about America's short-term economic prospects?
Economist Predicts Recession
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Lakshman Achuthan, co-founder and economist of the Economic Cycle Research Institute, said late this week on CNBC that he maintains a contrarian position and stands by previous sentiment that the U.S. is heading for another recession despite the recent progress seen in the data. He said in the interview he is convinced the U.S. is facing a substantial downturn in the months ahead.
"Our call stands," said Achuthan, in the interview. "When you look at the hard data that is used to officially date business cycle recessions, it has been getting worse, not better, despite what the consensus view of an improving economy has been."
Achuthan's reasons for a U.S. slip into a new recession: Slowing annualized GDP growth, and slowing personal income, sales and industrial production growth. He suggests a recession may be in place by mid-2012.
"You put all this -- you put it into a coincident index of the U.S. economy and if you look at year-over-year growth of that index, it's now at a 21-month low," Achuthan said on CNBC. "You haven't had a decline like that in the past 50 years without recession following in short order."
Naysayers point to rising consumer confidence as a reason for doubt that Achuthan is right. When consumers feel good, as they increasingly have in recent months, recession doesn't historically strike the U.S.
Consumer Confidence Remains High
"All recessions since at least 1978 have been preceded by sharp declines in the Michigan survey, and that's simply not the case this time," reported Jeff Cox, CNBC senior writer, countering Achuthan's forecast.
But there's a major threat brewing that could quickly derail consumer confidence: Rising oil and gasoline prices.
U.S. crude oil prices, closing last week at more than $109 a barrel, have risen to their highest levels since May 2008. Gasoline jumped more than 13 cents a gallon on average last week, due largely to turmoil with Iran causing supply-chain fears that military conflict may erupt.
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