Tuesday, 23 August 2011

Double-dip recession

A double-dip recession refers to a recession followed by a short-lived recovery, followed by another recession. It is also referred to as a ‘W’-shaped recession.

There are fears that the US may be facing a double-dip recession.
The US economy fell into what was at first a fairly mild recession at the end of 2007. But the downturn turned into a worldwide plunge after the failure of Lehman Brothers in September 2008 led to the vanishing of credit for nearly all borrowers not deemed super-safe. Banks in the United States and other countries needed bailouts to survive.The unavailability of credit caused a decline in world trade volumes of a magnitude not seen since the Great Depression, and nearly every economy went into recession.

But it turned out that businesses overreacted. While sales to customers fell, they did not decline as much as production did. That set the stage for an economic rebound that began in mid-2009. Manufacturers around the world reported rapidly rising orders.
Until recently, most observers believed the US economy was in a slow recovery, albeit one with very disappointing job growth. There is, of course, no assurance that a new recession has begun or will do so soon. But concerns have grown that the essential problems that led to the 2007-09 recession were not solved, like housing prices have not recovered; millions of Americans owe more in mortgage debt than their homes are worth; low employment growth.

No comments:

Post a Comment