London - The developed world's economies have become
ensnared in a growth slowdown that threatens to turn into recession, at a time
when room for manoeuvre with bold policy responses has narrowed significantly,
Reuters polls showed.
Surveys of more than 250 economists in North America, across
Europe and Japan portend steadily increasing chances that central bankers will need
to fire any weapons they may have left to stave off disaster.
The median probability of a second recession in the United
States, eurozone and Britain has climbed to roughly one in three - dangerously
close to where such predictions have been correct in the past.
Consensus forecasts for recessions rarely get to 50% before
history proves economies were already in one.
"The (US) economy is dangerously close to stall
speed," said Aneta Markowska, economist for Societe Generale. "There
is no buffer, and even a moderate shock could derail the cycle."
While several prominent economists have already stuck out
their necks with recession calls, those who work in the financial industry
appear reluctant to put minus signs in front of economic forecasts.
That said, top global central bankers on Monday said there
was no sign of a worldwide recession looming, even though growth is slowing.
Perhaps most striking over the past several months is the
change in the policy outlook as financial markets plunged into turmoil and
worries about the future of the European common currency have flared from slow
burn into a continental inferno.
"European sovereigns now constitute the biggest macro
risk," said John Lonski, economist at Moody's Capital Markets.
Economists as a group expect no interest rate rises from
either the US Federal Reserve, the European Central Bank (ECB), the Bank of
England or the Bank of Japan until 2013, which most would agree is too far
ahead in an uncertain future to forecast with any degree of accuracy.
This is bad news for the ECB, which has already looked out
of step with other central banks for raising interest rates twice this year -
albeit in tiny amounts - while a debt crisis burnt in several eurozone
countries.
Indeed, a handful of economists are now on the record
forecasting the ECB will cut rates before the year ends.
"We are in an environment where... unexpected outcomes
have become more probable, which has increased the probability that central
banks will provide more easing," said Divyang Shah, economist at IFR
Markets, a Thomson Reuters company.
"You have seen that debate shift at the Fed, you've
seen that debate shift at the Bank of England, and we have seen that debate
shift at the ECB, who at their last meeting focused more on the downside risks
to growth as well as the adjustments to the inflation outlook," said Shah.
Growth stalling
As for economic growth, forecasters took a hatchet to the
at-best modest expectations they had pencilled in for the remainder of this
year and 2012.
But only five of around 200 respondents to the poll had a
quarter of contraction anywhere in their forecast horizon for the United
States, eurozone or Britain.
Not a single economist predicted so much as one quarter of
contraction in gross domestic product (GDP) anywhere in the forecast horizon
for the United States. The lowest forecast was for no growth.
That is all the more striking given the growing sense of
urgency to address faltering growth, and the tens of thousands of job cuts at
the same financial institutions which are forecasting recovery.
President Barack Obama has proposed another $447bn worth of
stimulus for the moribund US jobs market.
Although the number of Americans living in poverty hit a
record 46 million in 2010 and jobless claims are still on the rise, some
untapped economic potential lies in the huge cash piles large US corporations are sitting on.
In Britain, the chances that the Bank of England will again
turn to quantitative easing to boost a stagnating economy are on the rise at
40%, the poll showed.
And in Japan, which in all likelihood rebounded strongly
from recession in the current quarter, the consensus shows that rebound tailing
off rather rapidly as the year ends.
The strong yen, which hit a record high against the dollar
last month on safe haven flows, has sapped the vigour of Japan's recovery from
the devastating earthquake and tsunami that struck just over six months ago.