Sept. 11 (Bloomberg) -- Odds of a U.S.-led “relapse” into global recession may be as high as one-in-three if any shock to the world’s biggest economy adds to depressed consumer demand, according to Stephen Roach of Morgan Stanley.
Economies emerging from recession need a “growth cushion” to avoid the possibility of a repeated slump, Roach, chairman of Morgan Stanley Asia, said in an interview in Dalian, China, yesterday, where he was attending a World Economic Forum event.
“The consumer is still dead money, the consumer is not coming back,” Roach said. “I’d put the relapse odds one in four, maybe as high as one in three,” he said, referring to the danger of a renewed global slowdown stemming from a shock to the U.S. economy.
U.S. household incomes decreased in 2008 and the poverty rate rose to the highest since 1997, boosting concern that consumer spending will play a limited role in leading any recovery from the worst recession since the 1930s. Plunging home values and stock prices have fueled a record $13.9 trillion loss in household wealth in the U.S. since the middle of 2007.
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