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"Expect Recession in 2005 or 2006, Economist Warns"
"LOS ANGELES -- Breaking with a current Wall Street consensus, Michael Bazdarich, senior economist with the UCLA Anderson Forecast, warns of a potential national recession within two years. In a report titled "U.S. Economy: Prelude to a Recession" released today, Bazdarich counters the belief that the national economy is early in a growth period that will only get stronger. Instead, he asserts that the underlying data reveal a recovery that may be close to the end. "In chronological terms, the expansion is still young -- and that supposed youth is what drives many to think that strong growth will resume," he said. "However, in most relevant respects, this expansion is very old, with the consumer, housing and even investment sectors displaying all the vulnerabilities they would normally have only after a long expansion."Bazdarich, along with UCLA Anderson Forecast Director Edward Leamer, have been warning for several years now that the recession-recovery cycle currently being experienced in the national economy is unique among similar post-war cycles. Historically, consumer spending dropped during such periods and powerful recoveries were fueled by the return of strong consumer activity.In the current scenario, consumer spending on housing, cars and other goods has been maintained throughout and there is no boost in consumer spending to spur the economy into high-growth mode. Along with an essentially maxed-out consumer base, current stock-flow dynamics and investment and inventory levels also mirror that of an "old" recovery, Bazdarich maintained.In a best-case scenario, the current slow patch in the recovery holds for two years or so, when more robust capital spending should reduce recession risk. In the meantime, a consumer-led pull back could induce a recession within the next two years, the report concluded.Visit UCLA Anderson Forecast: http://uclaforecast.com"