U.S. Economy Headed for Double-Dip Recession?

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Concerns about the economy sent the stock markets tumbling sharply lower Tuesday as the Dow lost 242 points, dropping to close below the 12,000 mark.

The drop comes shortly Congress passed a highly contentious debt deal and new reports showing the economy still struggling.

New reports show Americans cut back on spending last month for the first time in two years as incomes grew by the smallest amount in nine months.

The latest data is troubling news for economists who are worried America is slipping back into recession.

Economists are worried the U.S. might slip back into a recession as all key indicators are pointing that way.

Figures last week already showed that the U.S. economic recovery has slowed down dramatically, with annual growth of only 1.3 percent recorded in the second quarter.

Plus, some evidence may indicate that the protracted debt discussions in Washington have hurt economic confidence.

"The potential for a U.S. credit ratings downgrade has not disappeared from investors' minds but there has been a bigger move to focus on economic data this week," Sean Power, an equity analyst at City Index, said.

Manufacturing is growing at its slowest pace in two years and there's no indication it will turn around anytime soon.
   
The housing crisis continues to be a drag on the economy along with high unemployment.

The main number that investors care most about this week is likely to be the jobs report that will be released on Friday.

"The jobs report is an instant indicator - it's like taking someone's temperature and finding out if they have a fever or are freezing to death," said John Osbon, with Boston-based Osbon Capital Management.

Analysts are also worried about high oil prices and slower growth in other parts of the world, especially in China and Europe.

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