U.S. Gas Prices
U.S. gas prices are on the rise -- averaging $4.20 a gallon in California and $3.91 in New York last week. REUTERS

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

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.

The average price of a gallon of gas reached $4.20 in California and $3.91 in New York last week, and some experts suggest the national average could reach $4.20 a gallon within months -- or soar even higher if a major conflict involving Iran results.

If rising gas prices push consumers to curb spending, the slow-growth economy that finally chugged out of a recession could in fact slide back into one again as Achuthan predicts. High gas prices could also spook investors who have pushed U.S. equities markets higher in recent months, considering they've become bullish on the string of positive news. One thing Wall Street understands, after all, is that high gas prices can make Americans cringe, tightly gripping dollars and slowing growth.

It's important to note, of course, that U.S. consumers are better prepared for high gas prices than they've ever been before. So it's likely their threshold for pain at the pump runs higher this go-round. More efficient cars and slightly less eager consumption are helping them overcome the latest sting, so it hasn't made a major impact -- yet. But there's only so far they'll likely go before crying foul.

The biggest fight over the rising gas prices at the moment appears to be in Washington, where Republicans and Democratic President Barack Obama are sparring over prices at the pump.

Republicans Want More Drilling

Some Republicans blame Obama for the recent price spike, suggesting more oil and gas drilling is required. Obama said this week in a Saturday radio address there are no quick fixes to higher gas prices and that only a long-term strategy that develops every available source of American energy -- oil, gas, wind, solar, nuclear, bio-fuels, and more will serve as solution.

Obama's argument of the immediate problem has merit in that current supply is ample amid tepid consumer demand, and experts agree that has nothing to do with the recent rising prices. Americans, Obama said in the radio address, know we can't just drill our way to lower gas prices.

Still, as Texas Sen. Kay Bailey Hutchison said in the Republican radio address on Saturday, Americans already strapped from the last recession are increasingly getting stung at the pump.

Gasoline prices have almost doubled in just three years -- and it's getting worse, she said. Last February, the average cost of a gallon of unleaded was $3.17 per gallon -- the highest February price ever. But this February's average is $3.57 per gallon -- and all forecasts are for prices to rocket above $4 per gallon during the summer driving season. Families and businesses will be devastated.

No question about that. It's just not as simple as an immediate solution in Washington, especially since Obama and the White House have been doing their best to convince Israel not to attack Iran over its developing nuclear program. Obama believes sanctions are the answer, not war -- considering large-scale military conflict involving Iran, the world's fifth-largest oil producer, would only send oil and gas prices even higher.

The president is certainly right about that.

Is the Tipping Point Near?

Regardless, it does seem clear that the U.S. economic recovery is facing a critical juncture, as Achuthan predicts. There's no denying a steep jump in oil and gas prices could throw economic momentum of course. Add into the equation Achuthan's forecast that the U.S. is heading into a new recession anyway because of slowing annualized GDP, personal income, sales and industrial production, and one can believe that a an economic tipping point for the U.S. may be near.

The best hope in avoiding the recession is that the Iran situation remains in check, and consumers are better equipped to handle the current rising gas prices than they've been at other times in history. To avoid a new recession, consumers will need to keep their confidence high and wallets open, so the slow-growth momentum that pulled America from its darker economic days in recent years continues in forward progress.

Otherwise, Achuthan's controversial call may end up being right.