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Overview:

Federal Reserve Chairman Ben Bernanke was crystal clear in late July with his declaration that the outlook for the U.S. economy was "unusually uncertain." We have been expecting a relatively muted economic recovery given the depth and breadth of the financial crisis - and the repair is still underway.

Our base case scenario remains that the United States will avoid a double-dip recession, which is what history would suggest. However, we are in unusual times, as we are still combating the effects of the financial crisis. Reflecting the unusually uncertain environment, conditions could break in either direction during the next six to 12 months. Glimmers of improvement in credit creation, evidenced by a pickup in the money supply, could indicate a return of animal spirits. Alternatively, this could be a false signal and pressure will return to politicians and central bankers for leadership.