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Topic: - recession in us
Submitted by:-

SUNIL KARIRA (52504)

GULSHAN NAGRA (52512)

KUMAR GODIA (52513)

GOPAL NATHANI (52514)

SANTOSH VASWANI (52515)

Submitted
to:-
PROF.KIRAN
HARDWANI

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 ACKNOWLEDEGEMENT

THE MOST PLEASING PART OF ANY PROJECT IS TO

EXPRESS GRATITUDE TOWARDS ALL THOSE WHO
DIRECTLY OR INDIRECTLY CONTRIBUTE TO
WORKING OF THE PROJECT.

WE ARE VERY MUCH THANKFUL TO

PROF.KIRAN HARDWANI FOR GIVING US SUCH
A FABOULOUS PROJECT WHICH REALLY
EMPOWERED OUR KNOWLEDGE.
DUE TO THIS, WE HAVE NOT ONLY LEARNED BUT
ALSO GOT WXACT MEANING OF THE TOPIC.OUR
MAM HAS ALWAYS ENCOURAGED & MOTIVATED IN
AA OUR ENDEAVORS.

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 WHAT IS RECESSION?

Recession:
A period of general economic decline; specifically, a decline in GDP for two or more
consecutive quarters.

It is mainly measured by a country's gross domestic product (GDP)

Recession is a normal (albeit unpleasant) part of the business cycle; however, one-
time crisis events can often trigger the onset of a recession.
A Recession is a contraction phase of the business cycle.

What Does Recession Mean?

A significant decline in activity across the economy, lasting longer than a few months. It is
visible in industrial production, employment, real income and wholesale-retail trade. The
technical indicator of a recession is two consecutive quarters of negative economic growth
as measured by a country's gross domestic product (GDP); although the National Bureau of
Economic Research (NBER) does not necessarily need to see this occur to call a recession.

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 DEFINITION OF RECESSION
Significant decline in economic activity lasting more
than a few months, which is normally visible in real
GDP, real income, employment, industrial production,
and wholesale-retail sales.

Attributes

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A recession has many attributes that can occur simultaneously and
includes declines in component measures of economic activity (GDP)
such as consumption, investment, government spending, and net
export activity. These summary measures reflect underlying drivers
such as employment levels and skills, household savings rates,
corporate investment decisions, interest rates, demographics, and
government policies.

Economist Richard C. Koo wrote that under ideal conditions, a

country's economy should have the household sector as net savers
and the corporate sector as net borrowers, with the government
budget nearly balanced and net exports near zero. When these
relationships become imbalanced, recession can develop within the
country or create pressure for recession in another country. Policy
responses are often designed to drive the economy back towards this
ideal state of balance.

A severe (GDP down by 10%) or prolonged (three or four years)

recession is referred to as an economic depression, although some
argue that their causes and cures can be different. As informal
shorthand, economists sometimes refer to different recession shapes,
such as V-shaped, U-shaped, and L-shaped and W-shaped
recessions.

Shapes of recessions
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 V-shaped recession

The Recession of 1953 in the United States is a classic V-shape.

In a V-shaped recession, the economy suffers a sharp but brief period
of economic decline with a clearly defined trough, followed by a strong
recovery. V-shapes are the normal shape for recession: "There is a
strong historical snap back relationship between the strength of
economic recovery and the severity of the preceding recession. Thus,
recessions and their recoveries have a tendency to trace out a V
shape.
A clear example of a v-shaped recession is the Recession of 1953 in
the United States. In the early 1950s the economy in the United States
was booming, but because the Federal Reserve expected inflation it
raised interest rates, tipping the economy into recession. In 1953
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growth began to slow, in the third quarter, the economy shrank by 2.4
percent. In the fourth quarter the economy shrank by 6.2 percent, and
in the first quarter of 1954 it shrank by 2 percent before returning to
growth. By the fourth quarter of 1954, the economy was growing at an
8 percent pace, well above the trend. Thus GDP growth for this
recession forms a classic v-shape.

U-shaped recession

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The Recession of 197375 in the United States could be considered a
U-shaped recession.
A U-shaped recession is longer than a V-shaped recession, and has a
less-clearly defined trough. GDP may shrink for several quarters, and
only slowly return to trend growth. Simon Johnson, former chief
economist for the International Monetary Fund, says a U-shaped
recession is like a bathtub: "You go in. You stay in. The sides are
slippery. You know, maybe there's some bumpy stuff in the bottom, but
you don't come out of the bathtub for a long time.

The 197375 recession can be considered a U-shaped recession. In

early 1973 the economy began to shrink and continued to decline or
has very low growth for nearly two years. After bumping along the
bottom, the economy climbed back to recovery in 1975.

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 W-shaped recession

The Early 1980s recession in the United States is sometimes given as

an example of a W-shaped recession.

A W-shaped recession or "double dip" recession, occurs when the

economy has a recession, emerges from the recession with a short
period of growth, but quickly falls back into recession.

The Early 1980s recession in the United States is cited as an example

of a W-shaped recession. The National Bureau of Economic Research
considers two recessions to have occurred in the early 1980s. The
economy fell into recession from January 1980 to July 1980, shrinking
at an 8 percent annual rate from April to June of 1980. The economy
then entered a quick period of growth, and in the first three months of
1981 grew at an 8.4 percent annual rate. As the Federal Reserve

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under Paul Volcker raised interest rates to fight inflation, the economy
dipped back into recession (hence, the "double dip") from July 1981 to
November 1982. The economy then entered a period of mostly robust
growth for the rest of the decade.

L-shaped recession

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An L-shaped recession occurs when an economy has a severe
recession and does not return to trend line growth for many years, if
ever. The steep drop, followed by a flat line makes the shape of an L.
This is the most severe of the different shapes of recession.
Alternative terms for long periods of underperformance include
"depression" and lost decade; compare also "malaise".

The Japanese asset price bubble led to a Lost Decade in Japan; this
period has been characterized as an L-shaped recovery.

A classic example of an L-shaped recession occurred in Japan

following the bursting of the Japanese asset price bubble in 1990.
From the end of World War II throughout the 1980s, Japan's economy
was growing robustly. In the late 1980s a massive asset-price bubble
developed in Japan. After the bubble burst the economy suffered from
deflation, and experienced years of sluggish growth; never returning to

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the higher growth Japan experienced from 1950-1990. Because the
late-2000s recession in the United States followed a similar economic
bubble (the United States housing bubble) some economists fear the
U.S. economy could enter a prolonged period of low growth even after
recovering from the recession.

Causes of recession
The rate of joblessness assumes disturbing proportions.

Usually, the rate of jobless people remains steady every month. But if there is a constant,
steep rise in that number, then this could be a sign of recession.
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Large companies start giving depressing profit figures. When many companies across
all sectors start giving out depressing sales and profit figures, then alarm bells should start
ringing.

Borrowers start defaulting. When borrowers are unable to pay back their loans on
homes, vehicles, businesses and credit cards, then this could be another indication of a
falling economy.

Prices of essential commodities shoot up.

When prices of food, fuel and other utilities shoot up - and the government seems helpless
to do anything - then it could be said that inflation is fanning the flames of a possible
recession.

Companies stop filling vacancies.

When companies decide to keep their job openings vacant instead of hiring new staff, then
this again is another sign that a recession has afflicted the economy.

Many companies might also offer voluntary retirement programs in order to reduce their
workforces and cut expenses.

Prices of property and stocks come down drastically, but nobody buys them.

When repossessed homes and stock prices come down in value, but nobody has the funds
to buy them, then it can be truly said that the economy has been hit by a recession.

The country's GDP goes down.

When a country's GDP, or Gross Domestic Production, registers a continuous downward fall,
then this could be another sign that the economy is in recession.

You start worrying about all of the above.

When you start feeling the pinch and start worrying about your own future on the above
points, then this will indicate that the recession has now reached your door.

Large companies start giving depressing profit figures.

When many companies across all sectors start giving out depressing sales and profit
figures, then alarm bells should start ringing.

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Borrowers start defaulting.

When borrowers are unable to pay back their loans on homes, vehicles, businesses and
credit cards, then this could be another indication of a falling economy. Prices of essential
commodities shoot up.

When prices of food, fuel and other utilities shoot up - and the government seems helpless
to do anything - then it could be said that inflation is fanning the flames of a possible
recession.

Companies stop filling vacancies.

When companies decide to keep their job openings vacant instead of hiring new staff, then
this again is another sign that a recession has afflicted the economy.

Reasons of recession
3 reasons why the US faces recession in 2008:

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1. More ripples from the subprime mortgage fiasco
The most important signal flashing recession is, of course, the subprime mortgage
fiasco. After years of monetary inflation on the part of the Federal Reserve, individuals
and families with poor credit were suckered into low-down-payment/low-interest
adjustable mortgages that simply cannot be maintained or repaid under current
conditions.

Their incentive is to sell the property quickly before their equity evaporates or the
financial institution repossesses it. Yet the massive oversupply of homes and condos for
sale has pushed prices down at a record clip and made additional foreclosures even
more likely. Next year, unfortunately, will be the Year of the Auction.

The financial institutions have also been punished well sort of. Various institutions
including hedge funds that hold these poorly performing debt obligations have been
forced (by accounting rules) to 'write down' the value of these assets, take huge paper
losses in the bargain, and pull in their financial horns.

Thus, any near-term recovery in housing must now fight a record supply availability,
falling prices, higher insurance costs and restricted credit a near-term impossibility in
my view.

Moreover, the slowdown in residential and commercial construction will send

secondary ripple effects throughout the economy. Laid-off construction workers don't
spend money. Construction and home furnishing suppliers sell less output and make
fewer investments. Even local governments will be pinched by declining property-tax
assessments and fewer developer fees. Things are likely to get worse before they get any
better.

2. Sky-high crude oil is near-term recession risk

The second major factor indicating a near-term recession is the sky-high price of crude
oil and refined product. Pushed upward by world-wide speculative Middle East war
fears and increases in demand (especially from China), increasing energy prices act as

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an inflationary 'tax' on domestic production and consumption throughout the market
economy.

Higher costs of production will lower profits; higher prices will reduce some
consumption. The only good news here is that any substantial economic slowdown in
2008 will eventually moderate the price of oil and other commodity prices as well.

3. Dollar devaluation is real wild card

The third factor in the current recession scenario and the real wild card is the
continuing decline in the value of the dollar in international money markets caused by
our Iraq blunder and the Federal Reservegenerated oversupply of dollars. Some
economists would argue that a devalued dollar is good for US exports, and thus positive
for the economy as a whole. I disagree for three reasons.

First, the bulk of crude oil purchases take place in dollars; a falling dollar translates into
still higher crude oil prices. Second, the US dollar is the major reserve currency of the
international monetary system and dollar-paying investments (such as US Treasury bills
and bonds) are held in massive amounts by foreign banks and governments. Dollar
devaluation makes these investments less attractive and any disinvestment in these
areas would sharply drive bond prices down and increase interest rates.

The third reason why dollar devaluation makes recession more likely is that it
effectively prevents the Federal Reserve from pushing US interest rates much lower. Any
additional Fed easing (inflation) would be seen as a signal of even further future dollar
devaluation and even higher dollar prices for oil.

Unfortunately, we will not be able to 'inflate' our way out of this recession this time. We
will simply have to take our lumps and let market forces liquidate the bulk of the
malinvestments caused by the unprecedented Greenspan money bubble. This
liquidation process will not be pretty but it is necessary to restore a sustainable
economic recovery in the years ahead.

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 EFFECT OF RECESSION
Bankruptcy

It is a legally declared inability or impairment of ability of an individual or organization to

pay its creditors. Creditors may file a bankruptcy petition against a debtor ("involuntary
bankruptcy") in an effort to recoup a portion of what they are owed or initiate a
restructuring. In the majority of cases, however, bankruptcy is initiated by the debtor (a
"voluntary bankruptcy" that is filed by the insolvent individual or organization).

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Credit crunch

A credit crunch (also known as a credit squeeze, finance crunch or credit crisis) is a
reduction in the general availability of loans (or credit) or a sudden tightening of the
conditions required to obtain a loan from the banks. A credit crunch generally involves a
reduction in the availability of credit independent of a rise in official interest rates.

Deflation

Deflation (or disinflation) economics, deflation is a decrease in the general price level of
goods and services. Deflation occurs when the annual inflation rate falls below zero
percent, resulting in an increase in the real value of money a negative inflation rate. This
should not be confused with disinflation, a slow-down in the inflation rate (i.e. when the
inflation decreases, but still remains positive. Inflation reduces the real value of money over
time; conversely, deflation increases the real value of money.

Unemployment

Unemployment occurs when a person is available to work and seeking

work but currently without work. The prevalence of unemployment is
usually measured using the unemployment rate, which is defined as
the percentage of those in the labor force who are unemployed. The
unemployment rate is also used in economic studies and economic
indices such as the United States Conference Board's Index of
Leading Indicators as a measure of the state of the macroeconomics.

Net job gains and losses by month in the United States

September 2008 280,000 jobs lost

October 2008 240,000 jobs lost
November 2008 333,000 jobs lost
December 2008 632,000 jobs lost
January 2009 741,000 jobs lost

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February 2009 681,000 jobs lost
March 2009 652,000 jobs lost
April 2009 519,000 jobs lost
May 2009 303,000 jobs lost
June 2009 463,000 jobs lost
July 2009 276,000 jobs lost
August 2009 201,000 jobs lost
September 2009 263,000 jobs lost
October 2009 111,000 jobs lost
November 2009 - 64,000 jobs created
December 2009 - 109,000 jobs lost
January 2010 - 14,000 jobs created
February 2010 - 39,000 jobs created
March 2010 - 208,000 jobs created
April 2010 - 290,000 jobs created
May 2010 - 413,000 jobs created
June 2010 - 125,000 jobs lost
2008 (September 2008 December 2008) 2.6 million jobs lost
2009 (January 2009 December 2009) 4.2 million jobs lost
2010 (January 2010present) - N/A
Current unemployment rate: 9.5%

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Since the start of 2008, 6.7 million jobs have been lost, according to
the Bureau of Labor Statistics

Stock market crash

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A stock market crash is a sudden dramatic decline of stock prices
across a significant cross-section of a stock market. Crashes are
driven by panic as much as by underlying economic factors. They
often follow speculative stock market bubbles.

Stock market crashes are in fact social phenomena where external

economic events combine with crowd behavior and psychology in a
positive feedback loop where selling by some market participants
drives more market participants to sell. Generally speaking, crashes
usually occur under the following conditions[citation needed]: a prolonged
period of rising stock prices and excessive economic optimism, a
market where Price to Earnings ratios exceed long-term averages,
and extensive use of margin debt and leverage by market participants.

Effects on it sector

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IT industries, financial sectors, real estate owners, car Industry,
investment banking and other industries as well are confronting heavy
loss due to the fall down of global economy.
Inflation and psychological impact of the us crisis.
Benefits are missing as companies look to cut cost.
Indias export growth is also slowering down.
One of the casualties this time is real estate, where building
projects are half done all over the country and in this tight liquidity
situation developers find it difficult to raise finance.

Effects on industrial sector

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Government and other private companies are reluctant in starting new
ventures and starting new projects.
Projects that are halfway to completion, or companies that stuck with
cash flow issues on business that are yet to reach breakeven, will run
out of cash.
Car, bike & truck sales down.
Steel plants also cutting production.
Hospitality and airlines are hit by poor demand.
Companies in the private sector and government sector are hesitant to
take up new projects. And they are working on existing projects only.
Projections indicate that up to one crore persons could lose their jobs
in the correct fiscal ending March. . The one crore figure has been
compiled by Federation of Indian Export Organizations (FIEO), which
says that it has carried out an intensive survey.

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The textile, garment and handicraft industry are worse affected.
Together, they are going to lose four million jobs by April 2009,
according to the FIEO survey.

Effects on banking sector

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Indian banks are facing through a tough time of liquidity crunch. Lehman
Brothers had invested a great amount in the stocks of Indian banks that
have invested in derivatives.

A sudden fall in the economy directly affected Lehman and Merrill,

eventually forcing them to file a bankruptcy.

Falling down of Lehman had a great impact on the leading international

bank, ICICI Bank, a bank that had invested in Lehmans bonds. This
meltdown even have covered the Axis Bank but not to a great extent.

Lehman Brothers had signed a partnership with some of the real estate
companies like Peninsula Land Ltd and DLF Assets. These have also
suffered a heavy loss.

With all this, the Indian Sensex swung violently downward, mainly because
of the foreign companies pulling out credits to meet high inflations.

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 IMPACT OF
GLOBAL
RECESSION ON
INDIA

Indian companies have major outsourcing deals from the US.

India's exports to the US have also grown substantially over the years.

More people have sold the shares in the Indian share market than they bought in the
recent weeks. This has added to the fall of sensex to lower points.

One danger meanwhile is of a dip in the employment market. There is already

anecdotal evidence of this in the IT and financial sectors, and reports of quiet
downsizing in many other fields as companies cut costs.

Many companies has laid off their staffs, the number of tourists inflow to India has
come down, companies have cut down compensations and perks etc, government
and other private companies are reluctant in starting new ventures and starting new
projects etc.

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 One of the casualties this time could be real estate, where building projects are half-
done all over the country and in this tight liquidity situation developers find it
difficult to raise finances.

The only way out of the mess is for builders to drop prices, which had reached
unrealistic levels and assumed the characteristics of a property bubble, so as to
bring buyers back into the market, but there is not enough evidence of that
happening.

A slowdown in the us economy is bad news for India because:-

Indian companies have major outsourcing deals from the us.

Indias export to the us also grown substantially over the years.

Indian companies with big tickets deals in the us are seeing their profit margin
shrinking.

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 Share market!

Most people have sold the shares.

Foreign investors have pulled out from stock market.
Stock broking houses are laying-off people.
People have started saving money.

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Central banks have worked to improve liquidity but are charging higher credits. The
interest rates have drastically increased from 11.5% to nearly about 16%.

The Repo Rate has been cut by 50 bps to 5.5 % w.e.f. November 03, 2008.

The SLR has been cut by 100 bps to 24.0 % w.e.f. November 08, 2008.

The CRR has been cut by 100 bps in two stages.

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 Impact on other countries
10 Countries Least Affected by the US Financial Crisis

Its official: The United States financial crisis has reverberated

around the world. Wall Streets supernova imploded into a black
hole, swallowing up the national economy, and then destabilizing most
locations reachable by commercial jet. That is to say, everything,
everywhere.

Nonetheless, some countries are faring better than others in this

stage of the crisis. While Spaniards offer banks their house keys,
Malaysians shrug. While Americans talk nonstop about the Second
Great Depression, Dubai investors are enjoying one of the biggest real
estate booms in the tiny United Arab Emirates history. Thailand sighs
with relief at its sizable reserves, and Armenia finally thanks the
heavens above for its obscurity.
Here are ten countries suffering 80-100% less than the United
States:

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 China

I was surprised to learn that China may not be dramatically affected by the United States
financial crisis. As it turns out, we in the US rely far more heavily on China than she does on
us.
China owns roughly 19% of US treasuries; if needed, it plans to use its
sizable budget surplus to snap up even more. In addition, the United States gobbles up the
majority of Chinese-made goods, meaning a decrease in consumer demand here will make
for a chilly Chinese export market.
However, China is not solely dependent on the United States for financial stability. A
host of new trade agreements mean China has a number of potential suitors waiting for
vast quantities of goods. Domestic demand is also on the up-and-up.
Finally, Chinas financial system has been closed for many years, protecting it from
shady assets. Though the country will feel the international slump, its banking system is
probably safe. Its high domestic demand, huge pile of capital, and numerous other
major trading partners will counter the effects of US contagion.
Bad News: China would be badly hurt by a downturn in export demand from the United
States and Europe. It may yet be seriously affected.
Good News: They can rely more on domestic demand and demand from less-affected
countries, such as Brazil. Theyre also sitting on a mountain of cash, which they are using to
help bail out the United States.

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 Brazil

Latin American economies have boomed over the past few years. Brazil,
unlike some of its neighbors, stabilized its domestic economy while
positioning itself for increased foreign investment. The United States is
currently Brazils biggest trading partner, but is looking to boost
transactions and India, other major partners.

Bad News: The United States is Brazils biggest trading partner.

Good News: Brazil is positioned to take advantage of trade agreements and

foreign direct investment from India and China, two economies at the top of
the world ladder.

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 Romania

Romanias banks are barely exposed to international lenders. Therefore,

any economic slowdown it feels will be a secondary result of global patterns.
No shocks have occurred in the country itself.
Known by its own journalists the tiger of the east, Romanias economy has
been growing rapidly for the past few years. Though heavily embroiled in the
EUs economy, especially Italys, Romania is one of the worlds biggest military
equipment exporters.
Bad News: High exposure to the EU and foreign direct investment subject
Romania to the general effects of the coming global recession.
Good News: The country remains a hot FDI destination for European
companies looking for a good deal. Its strong IT services sectorlike a mini-
India for the EUis especially attractive. And then theres that military thing,
a sure winner in todays conflict-rich world society.

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 Thailand

AIGs gigantic Thailand subsidiary, AIA Thailand, has more than half of the
Thai market cornered. Its also sitting on 286.67 billion baht worth of
reserves (about 8.3 billion US dollars), 383 billion baht ($11.1 billion) worth
of assets, and capital funds worth roughly 1100% of the legally required
minimum.
Foreigners affected directly by the US financial crisis may have
outstanding loans in Thailand. The country, however, isnt worried, because
the amount of these loans is relatively small.
Bad news: Thailands largest insurance company is an AIG subsidiary.
Good news: Its sitting on a pile of cash.

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 North Korea

Although the country has recently enjoyed burgeoning trade ties with South
Korea and China, both vulnerable to the US financial crisis, North Korea
remains isolated enough to limp through the financial crisis relatively
unscathed.
Bad News: No stranger to famines and subsistence farming, people living in
this brittle Communist relic may lose hope as foreign direct investors from
affected countries stall capital inflows.

Good News: North Koreas economic isolation will, for once, come in handy.

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 Iran

Longstanding sanctions have kept Irans economy relatively insulated from

foreign
Investment outside of a select few sectors. One of those sectors is oiland
China is one of its biggest trading partners. A fortuitous arrangement for all.

Bad News: Iran trades a lot with Europe, which is moldering under the
financial crisis.

Good News: Iran does not trade with the United States. It does,
however, provide petroleum to oil-hungry China, a business that should float
the country for at least another decade.

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 Malaysia

This Southeast Asian country hosts a number of multinational manufacturing

facilities. Though some of these companies are in the United States, experts
say that bad times will promote more offshore production in bargain-rich
Malaysia, not less.
Malaysia is also gaining a reputation as a good China alternative in
manufacturing circles. Its rumored to be slightly more expensive, but
produces higher quality goods, and is easier to deal with. Malaysia is also
gaining a reputation as a solar energy hotspot.
Bad News: Malaysia does a lot of business with the United States.
Good News: Companies looking to cut costs come to Malaysia, making it an
even more likely outsourcing destination for leaner businesses.

Morocco
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Moroccan officials claim not to be affected by the United States financial
crisis because their banks dont contain any subprime assets. But that notion
only scratches the surface of why Morocco will survive the shakeup. Its
resource and agricultural assets are the real keys to its invulnerability.
For one, this stable, slow-growth economy relies heavily on agricultural assets,
such as almonds. It could feed its entire domestic population with the food it
produces, beneficial in a world of rising food prices.
Half of its income comes from valuable phosphate mines32% of the worlds
reservesa commodity whose prices have increased 700% during the past two
years (triggering talk of peak phosphorus).

Bad News: Morocco is heavily involved in foreign direct investment, especially

from France, and tourism to boost its economy. These two assets will likely
diminish because of the United States crisis.
Good News: Moroccos natural assets, including its coveted phosphate, will
keep its economy greased enough to offset any losses.

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 Armenia

This small Eurasian country hasnt involved itself much in foreign

affairs. Banking is no exception. Its relatively undeveloped financial market
has so few interests in the outside world that the crisis didnt make a blip.
Bad News: Integration with outside markets means development for small
countries like Armenia. Officials hunger to expose it more too external
markets.

Good News: That same lack of exposure protected Armenia from the US crisis.
It could be argued that Armenia is the least affected country of all.

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 The United Arab Emirates

Driven by regional oil exports, the United Arab Emirates boasts one of
the worlds fastest-growing economies. The UKs Guardian calls it the home of
the Arabian Dream, the worlds new version of the spent American dream.
Dubais free trade zone, exalted commercial real estate market, and financial
services make it an international powerhouse. This growth was fueled by oil
revenues, but now has a momentum of its own.

This world map shows a list of countries that are considered least affected by
the global economic crisis.

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Australia takes the top spot followed by China with India and Singapore in
equal third place. Qatar is the only gulf nation that figures in this "relatively"
recession-proof list.

The data is based on the results of a business confidence survey that was done
on international business people of 24 nations to identify which countries
they believe are surviving the crisis the best.

The countries perceived to be surviving the economic crisis the best, as voted
by international businesspeople are:

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43
 Recovery of recession
The U.S. economic slowdown will be more extensive and the recovery milder than
previously forecast, a new survey released Tuesday by Bloomberg News indicated.

The 62-economist who responded to the March 2008 survey expect the U.S. economy to
grow at an annualized rate of 0.3% in the first half of 2008, a half-percentage less than
economists had projected in February 2008.

The U.S. economy grew just 2.2% in 2007, after registering 2.9% growth in 2006. In 2007,
the nation's GDP totaled $13.84 trillion in 2007, not adjusted for inflation. Further, in a data
point many economists consider to be indicative of additional economic slowing, last week
the U.S. Labor Department announced that the U.S. economy lost 63,000 jobs in February
2008.

Their prediction is that the economy will bottom out in 2009 and begin to recover in 2010,
The general economic decline cycle will bottom in 2009 and we could see stability
sometime late 2009 or early 2010, then we will be back to modest recovery in late 2010 or
early 2011. However, the real estate, construction and financial Industries will bottom in
2010; the recovery could start in 2011.

2010 is the consensus for when the economy is expected to recover. The big question is
what should the Obama administration do to help recovery along this year? Obamas plan
should be directed towards three areas, helping those who lost their jobs, dealing with the
mortgage crisis, and long term economic development. T

He infrastructure projects are necessary, but the economy could be in recovery before these
projects ever break ground. The focus of any package should be helping those who are
hurting now. Government cant solve the recession, but it can cushion the blow.

A factor: rising energy costs

Economists surveyed said rising fuel prices, declining payrolls, and falling home prices will
decrease consumer spending and lessen the impact of the federal income tax rebate checks,
which consumers will begin to receive starting in May 2008.

However, economists surveyed did not change their recession likelihood estimate. They put
the risk of recession during the next 12 months at 50% in March 2008, the same percentage
as the February 2008 poll.

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Economic Analysis:
The revised survey is more-pessimistic regarding the U.S. economy's outlook, and reflects
the softening labor market conditions indicated by the February 2008 jobs report. Further,
given the housing sector's deep recession and labor market softness; any increase in first-
half 2008 U.S. GDP would be seen as a modest victory: some say the first-half 2008
economic performance could be considerably worse.

It's also important to point out that the above March 2008 survey was completed before
the U.S. Federal Reserve's most-recent decision on March 11, 2008 to increase liquidity via
the launch of its new, $200 billion Term Securities Lending Facility for 28-day loans for
primary dealers, not to be confused with the separate Term Auction Facility.

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 Conclusion
The global economy is in a tough spot, caught between sharply
slowing demand in many advanced economies and rising inflation
everywhere, notably in emerging and developing economies.
Global growth is expected to decelerate significantly in the
second half of 2008, before recovering gradually in 2009. At the
same time, rising energy and commodity prices have boosted
inflationary pressure, particularly in emerging and developing
economies. Against this background, the top priority for
policymakers is to head off rising inflationary pressure, while
keeping sight of risks to growth. In many emerging economies,
tighter monetary policy and greater fiscal restraint are required,
combined in some cases with more flexible exchange rate
management. In the major advanced economies, the case for
monetary tightening is less compelling, given that inflation
expectations and labor costs are projected to remain well
anchored while growth weakens noticeably, but inflationary
pressures need to be monitored carefully.
Now countries needed to put their energies into restoring credit
flows since economic stimulus plans would otherwise struggle to
work. Monetary policy "should be capable of taking more into
account ... the accumulation of risks that it had left a bit to one
side before." If governments adopted the right policy mix and
stimulus programmes were accompanied by the restoration of a
functioning financial system, it was possible for the world
economy to begin its recovery early next year.

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 BIBLIOGRAPHY

FOR MAKING THIS PROJECT, WE HAVE TAKEN THE

HELP OF THE FOLLOWING WEBSITES:-
1) www.google.com
2) www.wikipedia.com
3) www.scribd.com
4) www.management paradise.com
5) www.ask.com
6)www.yahoo.com

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