Baring Asset Management is predicting that the US economy will not come out of recession until 2003....
Baring Asset Management is predicting that the US economy will not come out of recession until 2003.
The group believes the US consumer will be quite conservative faced with tougher economic conditions.
James Williams, chairman of the strategic policy group at Barings, said: 'We expect US consumers to be more inclined to repay their debt and lift their savings rate. This will suppress consumption until at least the middle of 2002.'
He added that there should be a stronger recovery than was envisioned but that it would not take place until 2003.
Schroders is also predicting a US recession and sees the consumer as key to bringing it to an end. The group's head of North American equities, Ian Brady, however, is factoring in a recovery in the second half of 2002.
He said the long-term outlook for equities remains unchanged and that Schroders predicted the slump in consumer confidence before the terrorist attacks of 11 September, which have served to hasten the process.
Assuming a limited military response, the prognosis for the US economy is good for the second half of next year. Brady said government and business spending will boost economic activity, which will feed into consumer confidence.
His optimism is boosted by a belief that the global economic situation is not nearly as poor as in previous crises, providing all the fundamentals for recovery in 2002.
He compared today's events with the oil crisis of the early 1970s which he said was compounded by a war in Israel. High interest rates and large-scale industrial action all added to the after-effects of the Vietnam war, he claimed, creating a much more torrid overall economic picture.
Brady added that at that time, there was a perception that the price of oil was set to continue increasing until it hit $100 per barrel.
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