Are we headed for another recession?

Worrisome economic signs heighten fears that a global downturn is on the way.


WASHINGTON (AP) -- Discouraging economic data from around the globe have heightened fears that another recession is on the way.

Fresh evidence emerged Thursday that U.S. home sales and manufacturing are weakening. Signs also surfaced that European banks are increasingly burdened by the region's debt crisis and sputtering economy.

The rising anxiety ignited a huge sell-off in stocks that led many investors to seek the safety of U.S. Treasurys.

Economists say the economic weakness and the stock markets' wild swings have begun to feed on themselves. Persistent drops in stock prices erode consumer and business confidence. Individuals and companies typically then spend and invest less. And when they do, stock prices tend to fall further.

"A negative feedback loop ... now appears to be in the making" in both the United States and Europe, Joachim Fels and Manoj Pradhan, economists at Morgan Stanley, said in a report Thursday. Both economies are "dangerously close to a recession. ... It won't take much in the form of additional shocks to tip the balance."

The risk of a recession is now about one in three, according to Morgan Stanley and Bank of America Merrill Lynch.