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America’s recovery a ‘false dawn,’ says Stephen Roach

Despite signs that the U.S. economy is gaining traction, Stephen Roach, former chairman of Morgan Stanley Asia, says the recovery appears to be a "false dawn."

"Financial markets and the so-called Davos consensus are in broad agreement that something close to a classic cyclical revival may finally be at hand for the U.S. But is it?" Roach, a senior fellow at Yale University, wrote in an op-ed published on the Project Syndicate website on Monday.

(Read more: Summers: Fix US economy? Try fixing JFK)

"At first blush, the celebration seems warranted… But my advice is to keep the champagne on ice," he said.

Roach argues that two quarters of strengthening gross domestic product (GDP) growth doesn't indicate a breakout from an anemic recovery. He cited a temporary acceleration in the second and third quarters of 2010 as well as in the fourth quarter of 2011 and the first quarter of 2012.

Roach says he would not rule out a similar outcome this time around, given much of the growth uptick has been driven be an "unsustainable" surge of restocking. Over the first three quarters of 2013, rising inventory investment accounted for 38 percent of the 2.6 percent increase in total GDP, he said.

"With inventory investment unlikely to keep accelerating at anything close to its recent rate, overall GDP growth can be expected to converge on this more subdued pace of final demand," he said.

According to Roach, the toughest issue for the economy is the ongoing household "balance sheet recession" that is stifling American consumers who are still working to pay down debt and remain in saving mode.

(Read more: China won't overtake US economy until 2028: CEBR)

The debt-to-income ratio – or the percentage of a consumer's monthly gross income that goes toward paying debts – for U.S. households is now down to 109 percent, well below the peak of 135 percent reached in late 2007.

In the 17 quarters since the "recovery" began, annualized growth in real personal consumption expenditure has averaged just 2.2 percent, compared with a pre-crisis trend of 3.6 percent from 1996 to 2007, he said.

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