Citigroup Sees U.S.

Stall Speed Risk Rising: Chart of the Day - Bloomberg

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Citigroup Sees U.S. Stall Speed Risk Rising: Chart of the Day

By David Wilson - Nov 16, 2011

U.S. economic growth is perilously close to a stall speed that increases the odds of recession, according to Nathan Sheets, Citigroup Inc.s global head of international economics. Gross domestic product rose 1.6 percent in the third quarter from the year-ago period. The rate of expansion in the value of goods and services produced is near a 1.5 percent pace at which growth tends to give way to contraction, Sheets wrote in a Nov. 11 report. The CHART OF THE DAY shows the historical basis for his conclusion by comparing the Commerce Departments GDP figures with recession periods, as defined by the National Bureau of Economic Research, since 1971. Fourth-quarter growth of less than 1.75 percent would send GDP below the stall-speed threshold, according to Sheets, who served as director of the Federal Reserves international- finance unit before joining Citigroup in September.

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Citigroup Sees U.S. Stall Speed Risk Rising: Chart of the Day - Bloomberg

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The economy could be very vulnerable to a double-dip recession, sparked by a failure of Congress to approve further stimulus-related spending or a spillover effect from Europes sovereign debt crisis, he wrote. At low growth rates, the economy is more sensitive to shocks. Any decline to less than 1.5 percent this quarter may set the stage for GDP to shrink another 3 percentage points or so during the next four quarters, the report said. To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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