LPL Financial Weekly Economic Commentary for July 7, 2010

John Canally, CFA
Economist
LPL Financial

How Likely Is A “Double Dip”?

There has been increased talk recently about the possibility of a “double dip” recession occurring in the United States. A “double dip” recession would mean that the United States economy — which has most likely been in an economic recovery since the summer of 2009 — would slide back into another recession at some point in the near future. In our view, while the odds of a double dip have increased in the past few months, we don’t think a “double dip” is likely to occur given the current economic and policy backdrop. However, a sudden surge in commodity prices, a sharp increase in global central bank policy rates, a collapse in overseas economic growth, rapid reigning in of fiscal stimulus in the United States, and/or a dramatic flattening of the yield curve would cause us to change our view.

Highlights

After a blistering two-week stretch of mostly sub-par economic data, this week is a very quiet one for economic data and policy events in the United States.

The June employment report capped off another disappointing weak of economic data, reviving talk of a “double dip” recession.

How likely is a “double dip” recession?

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