Are we in a slowdown or a double dip?

Are we in a slowdown or a double dip? This is the question the markets are dealing with. Being in an economy like India, it becomes especially difficult to answer this question. This is because of the dichotomy that exists between us and the rest of the world. While we are growing our GDP at 8-9% pace, the other economies are struggling to keep the numbers positive. If we as investors can answer whether US is going to slowdown or go into double dip recession, we have our strategy laid out. This is irrespective of India’s GDP growth as we are overly dependent on foreign capital for both equity market growth and corporate earnings growth.

I have an article by BCA titled “Gauging the risk of recession: slowdown or double-dip?”. I rate the research reports of BCA highly because of their depth of research due to availability of intellectual capital and resources. They believe that we are slowdown and not a double dip. The probability of double dip is zero.

Data point – Trend – Indicates warning of recession?
Avg. weekly initial claims for unemployment insurance – Falling - No
Unemployment Rate - Flattening - No
Credit Spreads - Falling - Nearing

Fed Funds Rate - Falling No
Inflation Expectations - Falling - No

Oil Prices - Rising No

Yield Curve - Rolling Over - No

Leading Economic Indicator - Rising - No
Money Supply, M2 - Falling ROC - No
Avg. weekly hours, manufacturing - Rising - No
Interest rate spread, 10-year treasury bonds less fed funds - Rolling Over - Yes
Manufacturers’ new orders, consumer goods and materials – Rising - No
Index of supplier deliveries - vendor performance - Flattening - No
Stock prices, 500 common stocks - Flattening - No
Index of consumer expectations - Rolling Over - No
Building permits, new private housing units - Rising - No
Manufacturers’ new orders, nondefense capital goods - Rising - No
Coincident Economic Indicator - Rising - No
Employees on nonagricultural payrolls - Picking Up - Yes
Personal income less transfer payments - Picking Up - No
Industrial production - Rising - No
Manufacturing and trade sales - Rising - No