Uncertainty driving recession fears

Is another recession imminent? US growth has dropped again, slowing to only 1/5 percent in the last quarter. The continued decline could become a self-fulfilling prophecy as investors begin bracing for recession. 

LOS ANGELES, CA (Catholic Online) - There's a few things looming on the horizon that are putting downward pressure on the economy. Europe's economic crisis, likely tax increases for next year, pending cuts to spending, and a particularly divided congress all contribute to uncertainty that keeps investment dollars from being put to their full potential. 

The slowing economy has many speculating that the Federal Reserve will have to take yet more action to stimulate the economy. 

Despite the slowing pace of growth, there are some bright spots in the news. Home sales have continued to improve with prices rising. Builders have already stopped new construction and bank foreclosures are being sold, although most of the purchases are from investors looking to convert the homes to rental properties. 

Exports have also risen to 5.3 percent, and government cutbacks across federal, state, and local levels have eased off, keeping more people employed and contributing. 

However, investors and consumers both are holding tightly to their money. Despite historically low interest rates, few people appear willing to buy or invest. Instead, Americans are saving, with a new personal savings rate of 4 percent, up from 3.6 percent in the second quarter. 

Above all, the indecision in government and the pending elections have perhaps the greatest impact on the economy. Questions abound over tax cuts, fiscal policy, and of course, health care. Depending on who wins the presidency in November, the US could become involved in overseas conflict, or not. 

Investors don't like uncertainty, and as long as uncertainty abounds, we can expect a weak economy and continued financial difficulties. This is a situation that will certainly persist until November, and possibly well into 2013. 

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