Roubini sees high risk of a US recession

KUALA LUMPUR: New York University professor Nouriel Roubini said there’s a high probability of another recession in the US, with Japan’s outlook “anemic,” underscoring risks to the global recovery. China, the world’s fastest-growing major economy, may face greater headwinds should there be weak growth in the US and Europe, Roubini said in Kuala Lumpur on Monday, where he is attending a conference. Second-quarter gross domestic product figures for the US are likely to be revised lower after “awful” June real-estate numbers, he also said.

Austerity measures to cut debt in advanced nations are hurting consumer and business confidence, and households in some of the largest economies are holding back spending. Emerging economies may have to get used to relying on domestic demand in a period of subdued growth for developed countries, Roubini said.

“We know the second half of the year is going to be worse than the first half of the year because of the tailwinds to growth from the fiscal stimulus” turning into austerity, he said. “The main scenario is an anemic recovery, but I don’t rule out that a double-dip will occur” in the US, he said.

An American jobless rate hovering near 10% is shaking consumer confidence and limiting spending, the biggest part of the economy. Federal Reserve policy makers last week said growth is likely to be “modest in the near term” and added that they are prepared to ease monetary policy further if needed to support the recovery. The world’s largest economy expanded at a 1.6% annual rate, the Commerce Department said. A US growth rate of 1% will feel like a recession, Roubini said.

Steve Forbes, CEO of publisher Forbes, said separately on Monday that the US won’t have another economic contraction because political shifts, rising capital spending and a rebound in housing will keep the economy growing.

“This isn’t going to be a repeat of the 1970s,” Forbes said at a conference in Sydney. Warren Buffett, chairman of Berkshire Hathaway, has also ruled out the prospect of a double-dip recession, in September 14 comments at the Montana Economic Development Summit.