Around one year ago, there were huge fears that the US and European economies were hurtling towards a double-dip recession. These fears receded in the latter half of 2010.
Is it now time to worry about a double-dip once again? US housing prices measured by the popular Case-Shiller index are below the post-crisis low of April 2009. The latest US jobs data also shows that the recovery in the world’s largest economy is faltering. And while some members of the European Union are in better shape than a year ago, the problems in Portugal, Greece and Ireland continue to be a concern.
These worrisome data come at a time when policymakers are trying to exit the accommodative policies in their regions. The US Fed is due to wind down QE2 at the end of June. The European Central Bank has set its eyes on higher interest rates. There is pressure to cut fiscal deficits. The dreaded double-dip may yet strike.