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Recession nearing end but recovery slow
America’s longest and deepest post-war recession will end near the middle of this year, but it will be a long, slow haul to recovery, according to the chief economist of Bank of New York Mellon, Richard Hoey.
Hoey has used his latest economic update to suggest that while recovery will occur from about the middle of this year, the rate of growth in the subsequent expansion will be sub-par.
“The financial crisis has begun to ease,” he wrote. “The initial improvements were in markets benefiting directly from government or central bank support.
“More recently, there have been substantial improvements in unsupported at-risk markets. Risk spreads are off their peak levels in nearly all markets. We regard this broad pattern as providing clear evidence that risk aversion is easing,” Hoey wrote.
“In our opinion, the financial panic has crested and the economy and markets have transitioned into a phase of orderly deleveraging."
However, in discussing the expected recovery, Hoey said there had been a clear historical pattern, with the sharpest recessions followed by the strongest rebounds, with growth rates of up to 6 per cent.
“However, we do not believe this will occur this cycle. Instead, we expect a rebound at roughly half that pace,” he said.
AUTHOR
Mike Taylor
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