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Second recession likely for US

Second recession likely for US

(23 August 2012 – USA) Risks that the United States will slip into a second recession next year have risen according to ratings agency Standard & Poor’s (S&P). The US ratings firm raised the chance of the US falling into recession to 25 percent, up from a 20 percent chance estimated in February, as the world's largest economy struggles to recover from a severe 2008-2009 slump.

S&P pointed to the looming possibility of the government being forced by existing law to severely cut spending and increase taxes on 1 January, the so-called fiscal cliff that would crunch the economy.

Last week S&P said in a report that economic activity had downshifted sharply and at the same time, there was possible contagion from the eurozone crisis and a hard landing for China’s economy adding greater uncertainty to US economic prospects.

In the second quarter, the world's largest economy grew at a 1.5 percent annual rate, a sharp slowdown from late last year as unemployment remained stuck above 8.0 percent.

S&P also said it expected that politicians would agree before year-end to change the current severe budget cut and tax hike mandates to avoid the fiscal cliff fate.

However, it said, 'We do not believe the US and European economies will improve substantially in the next year.'
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