Swiss Re Economic Risk Survey: risk of US deflation small, but uncertainty remains over stock market
25 Jun 2003
The risk of deflation in the US is small, but the chance for a further stock market crash has increased substantially, according to Swiss Re's fifth survey of economists' opinions.
The 45 economists participating the "Economic Risk Survey," conducted in April, indicated that the risk of falling prices in the US over the next five years is about 3 percent, compared to 4 percent in the October survey. They also estimated the probability of a stock market crash - defined as a 25 percent decline in a major stock market index - is 21 percent in the US. This compares with 16 percent in October.
The twice-yearly Swiss Re-sponsored Economic Risk Survey takes the opinions of economists from Europe and the US, and focuses on the probability of economic performance substantially deviating from the general economic consensus.
Among other survey findings:
- Respondents indicated that the likelihood of stock prices declining in the US in 2003 - and not recovering to 2002 year-end levels until after 2012 - was about 5 percent, down from 7 percent in the October survey.
- The probability of high average inflation over the next three years has remained unchanged since the last survey, with the likelihood that the US economy experiences average CPI inflation of 4.5 percent or more for the next three years is 6 percent, up slightly from 4.6 percent six months ago.
- The respondents gave a 71 percent probability of economic growth being greater than 1 percent, but less than 3 percent. That figure is up from the 60 percent figure in the October survey.
- The risk of two years of negative growth eased to 6 percent in the US according to the economists. That figure is down from 8 percent from the last survey.
*Please note that the results from the two surveys are not strictly comparable, since the number of total respondents has increased from 36 to 45. Additionally, some new respondents have been added, while others have departed.
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