Zero 2009 US GDP may be optimistic - Deutsche

08 October 2008 15:48  [Source: ICIS news]

HOUSTON (ICIS news)--Analysts at Deutsche Bank fear they are too optimistic even though they slashed their projections for the US to show the world's biggest economy at a complete standstill in 2009, the bank said in a commentary distributed on Wednesday.

"Despite these significant changes, we are worried that we have not gone far enough in reducing our growth outlook, because financial conditions are deteriorating at an ever faster pace," the analysts said.

On Tuesday, the bank's analysts cut their 2009 earnings forecasts for American chemicals producers, forecasting a mild recession in the US and Europe that will continue to squeeze the industry.

"We sharply marked down our estimate of current quarter real GDP (gross domestic product) growth to show a 2% decline and lowered our forecast for full year 2009 growth by 1 percentage point to zero," Deutsche Bank said.

But on a year-over-year basis, the bank said it expects fourth quarter 2008 growth of 0.3%.

"Under the scenario we have laid out, we anticipate the unemployment rate rising to above 7% by the second half of next year," the commentary said.

The US unemployment rate for September was 6.1%, the Department of Labor reported on Wednesday.

Deutsche Bank said that the US economy needs a credit expansion and without it, activity could collapse.  

"There are few, if any, episodes in the post-World War II period with which to draw comparison, but the credit controls of 1980 provide some guidance as to how quickly the economy can unravel if credit suddenly becomes unavailable," the commentary said.

On Wednesday, the Federal Reserve and other global central banks undertook a round of interest-rate cuts to try to shore up crumbling financial markets.

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