09 Jan, 2008
Published: 07:00 Wednesday 09 January 2008
By: Colin McClelland, News Editor, New Model Adviser
Chris Probyn, chief economist at State Street Global Advisors,
expects sub-par growth in the US to continue through the first half
of 2008 but not into a recession.
'More positively, core inflation is unlikely to be a problem,
although there are few grounds for optimism on oil prices,' said
Probyn. Also, the Fed appears poised to ease rates further, with a
cut in the funds target likely in January.
Probyn estimated the chance of recession at around 40%, saying that
after a slump in the housing market and capital spending, the
economy is now highly reliant on consumers.
'The eventual outcome will almost certainly depend on
developments in the labour and financial markets,' he said.
'Although the pace of hiring has moderated since the slowdown
began in early 2006, the labour market has stayed surprisingly
tight, with the unemployment rate only ticking up to 4.7% from its
cyclical low 4.4%.'
But he noted that data have shown jobless claims to be rising,
suggesting a potential loosening of the labour market that could
slow the growth of personal income and spending sharply enough to
turn a soft landing into a recession.