Senior economists with Wells Fargo say the current credit crunch in the mortgage market is unlikely to trigger a recession next year. To support this hypothesis, they point to the nation’s healthy growth in exports, as well as its strong employment figures and consumer spending.

“The big story here is that while housing spending has taken a full percentage point off real GDP growth, it’s been totally offset by a percentage point gained in trade,” Dr. Jim Paulsen, a chief investment strategist with Wells Capital Management, said. “For the first time in about 15 years, export growth is adding to real GDP growth, and it will continue as the dollar continues to weaken.”
Despite the economists’ skepticism when it comes to the idea of a recession, Wells Fargo’s top experts believe there’s another risk consumers need to be aware of.
“Inflation is the most pressing problem for the Federal Reserve today,” said Dr. Eugenio Aleman, senior economist with Wells Fargo. “The rate of inflation has been increasing the past seven years—such increases take a long time to build into the system, into expectations, into our daily lives. And once they do, it’s very difficult to get rid of the problem. The longer we take in slowing down inflation, the more difficult and risky it gets for the Federal Reserve and the economy.”