A Recession Watcher's Rx: Stimulus Now!

Time is short, this economist says, if a package to boost growth is going to be effective.


Lakshman Achuthan, who predicts recessions over at the Economic Cycle Research Institute, is gearing up for his latest call.

His weekly gauge of future U.S. economic growth sank, and the ECRI's annualized growth rate forecast plummeted back to a six-year low last seen in early January. In short, economic growth that managed to continue through the end of 2007 may be experiencing its last gasps.

"The window of opportunity to avert a U.S. recession is about to slam shut. This isn't good," he says.

Achuthan's opinion is worth a listen, as it comes with one of the better track records around. His group successfully predicted the last two U.S. recessions and managed to avoid a good chunk of false starts over the past couple of years, which is why his heightened concerns are another bit of bad news in a week when a host of reports showed weakness on everything from jobs to consumer spending.

But Achuthan still holds out hope that a stimulus package from Washington could save the day.

He reminds us that recessions rarely happen without the factory sector throwing in the towel. Today's report from the Institute of Supply Management showed some surprising resilience in the sector that could continue if—and only if—consumer demand doesn't fall off a cliff. The only way that will happen, he says, is if they get that extra infusion of government cash in the form of the $150 billion stimulus package making its way through Congress. And they need it now.

"That may give us this moment to sneak something in before the window slams shut," he says. "You could do something later this year, and it'll have nothing to do with averting a recession. You have to be doing something today. Or yesterday."