45% chance of recession, UBS says

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Source: Globe and Mail

UBS Ltd. now attaches a 45-per-cent probability to a U.S. recession next year, which is sharply higher than the 33-per-cent likelihood set last month. That is not the kind of news that investors want to hear, especially one day after North American stock markets and selected foreign markets took a hard hit.

The UBS team of economists added their voice to the chorus who warn that the U.S. economy may be in some trouble. For example, National Bank Financial strategists place even odds on a recession. Even former U.S. Federal Reserve Board chairman Alan Greenspan has acknowledged the risk of a recession. He has reiterated his view that the odds of a U.S. recession were less than 50-50.

The UBS team assessed the probability of a recession using a model based on four economic factors: the annual rate of non-farm payrolls growth, changes in U.S. housing starts, changes in U.S. home prices and the change in durable goods orders. Three of the four factors deteriorated last month, the team said.

"Recent evidence of tighter lending standards, courtesy of the Fed's senior loan officer survey, reinforces downside risks for the U.S. economy," the team said. "Rising oil prices and lost purchasing power are a further and growing concern."


Read more: http://www.theglobeandmail.com/servlet/story/LAC.20071109.RRECESSION09/TPStory/Business

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It looks like we are in for a rough ride.