US: Recession Risk? (OSK)

The weaker than expected GDP data together with disappointing annual revisions last Friday clearly raised eyebrows. The sub-1% growth environment in the first-half of 2011 led some to speculate that the risk of a recession might have risen appreciably. Given available data (economic and financial) at this juncture, our analysis suggests that the odds of a recession over the next six to twelve months are still relatively low (roughly at less than 20%) and statistically insignificant. But ongoing developments surrounding the US fiscal backdrop have the potential in inducing a negative shock to confidence and financial market conditions, thereby materially raising the likelihood of a downturn.