Weak data renew debate over double-dip US recession

A series of weak economic reports has sparked renewed debate over whether the US economy is poised for a strong rebound or teetering on the edge of a double-dip recession.

Brokerage Merrill Lynch, offering an increasingly bearish outlook, said Monday it is cutting its estimates for US growth.

David Rosenberg, Merrill's chief economist for North America, said he is cutting his outlook for fourth-quarter 2002 economic growth, to be released next week, to a 0.8 per cent pace "from what was an already below-consensus view of 1.3 per cent."

Rosenberg is maintaining his call for a 2.25 per cent growth pace in the first quarter of 2003, but added that "last week's data releases were so weak (that)... the risks are to the downside."

Rosenberg added that the case is building for the Federal Reserve to revert to its "de facto easing bias," which would set the stage for more interest rate cuts, as early as the January 29 meeting.

Economists are particularly concerned about figures showing declining consumer confidence -- which could affect consumer spending and its two-thirds of US economic activity -- as well as a surprise dip in industrial output.

Morgan Stanley economist Richard Berner acknowledges that Wall Street is worried.