"The economy is reeling from a double shock," explained NigelGault, group managing director for Global Insight's North AmericanMacro Services, during a web cast this morning. One shock--theinitial spark to the current problems-- was of course the housingdownturn and related credit crunch, which is now broadening intounrelated parts of the economy. The second shock is the ongoingpressure of oil prices that hover close to $100 per barrel.

Most likely, Gault said, there will be small declines in GDPgrowth for the first two quarters of the year. By the second halfof the year, the duel fiscal and monetary policy prescriptions thathave been thrown at the credit crunch and economic slowdown willstart to be felt. There will likely be a temporary lift, thenanother drop--after which the economy will be back on the road toconventional growth, Gault concluded.

Brian Bethune, director of Financial Economics for the USEconomic Service, who also participated in the web cast, which wasentitled "The US Economy: On the Brink", noted that there are twoconcentrated risks in the current economy cycle that still need toplay out before a true recovery can begin. These risks are to thecapitalization of the banking system and the larger generalbusiness cycle expansion. The policy prescriptions by thegovernment--particularly the Federal Reserve--appear to be workingand it is likely that the Fed will continue to support both fiscaland monetary measures. "We think [Federal Reserve chairman BenBernanke] will endorse the concept of fiscal stimulus" because itmeets his criteria of being a temporary measure and cost effective,Bethune said.