Moody’s lowers economic expectations (haven’t we all?)

Not unlike what the Federal Reserve did last week, Moody’s Analytics has lowered the United States’ short-term economic prospects:

Moody’s Analytics, a sister company to credit-ratings company Moody’s Investors Service, now expects real gross domestic product to increase at an annualized rate of about 2% in the second half of this year and just over 3% next year, compared with its estimate a month ago for growth of 3.5% for the second half of this year and through 2012.

The firm attributes most of the expected decline to a loss of business, investor and consumer confidence, noting the economy’s improving fundamentals such as the strengthening of business’s balance sheets and consumers’ strides in cutting household debt.

The credit-rating company also said it thinks the odds of a renewed recession over the next 12 months — now at 1 in 3 — will increase if stock prices continue to fall. Moody’s maintains that the odds of a renewed recession rise with each 100-point drop in the Dow Jones Industrial Average. While Moody’s expects the economic recovery will continue, prospects for economic growth and job creation have “diminished substantially.”

Though the U.S. economic recovery looked healthy at the beginning of the year, a series of events have hurt business, consumer and investor confidence, Moody’s said. These include surging prices for food and gasoline, natural disasters in Japan, Europe’s debt crisis and, most recently, the U.S. debt woes.

Of course, the answer to this has been more spending, or at President Barack Obama likes to call it, “investing.” We’ve done that and the economy has been largely stagnant, which is why most of us roll our eyes as he starts talking about the need for a jobs bill.

While I agree that not all of our problems are his fault, Obama has been president since January 20, 2009 and he had two years with a Democrat-controlled Congress to push his agenda on Americans. We may well be headed towards another recession and away from “recovery,” if that’s what you can call this. Let’s face it, Obama failed.

 


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