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Wednesday, October 20, 2010

Blau skies von Deutsche Bank

Tuesday, 19 Oct 2010 11:24 AM

By: Forrest Jones

The U.S. economy is leaving its recovery period and is set to enter an expansionary phase, and it won’t double-dip back into a recession, according to global financial giant Deutsche Bank.

Since 1947, the United States gross domestic product has never double-dipped into a recession before growing beyond its pre-crisis levels first, says Deutsche economist Carl Riccadonna.

“Since we are not projecting the economy to cross into expansion until Q4-2010/Q1-2011, it would be unprecedented for the economy to relapse into contraction in the meantime,” Riccadonna says, according to Business Insider.

“This follows logically, because recessions typically lead to a correction of imbalances, such as excessive inventory levels, abnormally low household savings or overinvestment in housing or [capital expenditures].”

Furthermore, a double-dip is unlikely even well into 2011.

“As the recession subsides, the newly rebalanced economy subsequently has greater resilience as the next cycle begins,” Riccadonna says.

Fears of a double-dip recession, often described as when an economy contracts, recovers and then contracts again, have grabbed headlines over the past couple of years, although many others have also rejected the notion, including Jamie Dimon, CEO of JP Morgan Chase.

“The American economy may be stronger than people think,” Dimon tells Fortune.

“At the root of my optimism is the sense that the embedded strengths of this country — a lot of which reside in its business — are still here. We work hard, we are innovative, we adapt quickly.”


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