Steven Roach, Morgan Stanley’s Chairman and former economist, says there’s a 40% chance of a double-dip.
Here’s how he calculates it, as told to the Wall Street Journal in a video interview:
- Weak recovery
- Weak labour market
- Weak consumer purchasing power
- The consumer, 70% of the economy, is still massively over extended in terms of debt, unprepared in terms of saving
- We’re unable to rely on property and credit bubbles to support consumption anymore
- If you have a disappointing consumer and you have any kind of unexpected shock, you could go down again
Double-dips are not as infrequent as you think, he says.
(BTW, the number of people searching “double-dip” in google has spiked recently.)
The predecessor is a weak recovery, and then there has to be some shock [to spark a double-dip].