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Economists suggest we may be heading into another recession

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Posted at 5:04 PM, Oct 26, 2021
and last updated 2021-10-26 20:06:57-04

SAN DIEGO (KGTV) -- A new study out of Dartmouth University and University College in London is predicting the start of another recession this fall. But some economists believe we are in better shape than the study suggests.

"What they found is that consumer expectations have decreased considerably," said University of San Diego economics professor Dr. Alan Gin. He is referring to the study recently published by David G. Blanchflower of Dartmouth University and Alex Bryson of University College London.

"They [the study] found consumers are feeling more pessimistic. Businesses are also feeling pessimistic. So they went back and looked at past recessions and found out that was a pretty good indicator of what was to come," Dr. Gin explained.

Dr. Gin attributes the downturn of consumer confidence, jobs, and the economy to the pandemic. But he believes the future is not as bleak as the study suggests.

"They are making the prediction, but I disagree," Dr. Gin said.

He believes the bigger issue now is inflation. Bad weather is increasing the cost of food production. Supply chain problems are causing a price increase in cars, tech, and other goods.

"Maybe some of the presents that people wanted to give at Christmas might not be available," Dr. Gin said.

To bounce back from the pandemic, restaurants, travel, and leisure prices are also up.

Remember when home prices plummeted during the Great Recession in the late 2000s? Dr. Gin says that is not happening any time soon. He says many Americans now with a little extra cash are scooping up homes already in low supply.

"They [Americans] didn't have places to spend their money. They couldn't go out to eat or engage and entertainment or travel, so they built up a lot of reserves which economists are calling a 'Covid Piggy Bank.' So a lot of those people then are putting their money into housing," Dr. Gin explained.

But as with any trend, Dr. Gin predicts things will simmer down. This one, by mid-2022.