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W-Shaped Recession Still Possible: Art Cashin

The danger of a W-shaped recession is not behind us, because consumers still have to keep spending after the government's money from various stimulus packages is over, Art Cashin, director of floor operations at UBS Financial Services, told CNBC Tuesday.

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"The concern is … that we're seeing some growth in the economy but it's all government-generated," Cashin told "Squawk Box."

"When the government giveaway stops, will the consumer pick up?"

The automobile sector boost came from the government's cash for clunkers program, which is now ending, while aid for buyers of a first home has also helped the housing sector, Cashin said.

But "we may be eating the seed corn… and maybe we'll have that W coming," he warned.

Optimism about the speed with which the economy will pick up was overblown, according to Cashin.

"Everybody is looking for that turn. People keep talking about the recovery starting … but the Fed statement didn't say recovery. It said levelling off," he said.

China, which many analysts hope will help pull the world out of the recession, faces the same problem of spending money to stimulate the economy but not managing to kick-start the private sector, he said.

"You want a spark that becomes sustainable. The same thing in China. Their economy is about exports," Cashin said. But if consumers elsewhere do not buy things, China's big manufacturing power is underutilized.

"I think… China's going to be important, it's going to be important for the next 6 weeks or so," he said.

More volatility in the Chinese markets may follow because "all their economic figures are suspect, people have started not to believe them," Cashin said, explaining that paradoxically China reports good export figures while the Baltic Dry Index, which tracks shipping prices, has fallen.

"Their banking system is more bizarre than ours was before the crisis," Cashin added, echoing fears by other analysts of loan defaults among Chinese consumers.