Global Recession Watch – A global recession isn’t inevitable
We continue to believe the global economy will narrowly avoid a recession, despite expecting the US, Canada, and most of Europe to fall into recession at some point over the next year or so.
What you will learn:
- Avoidance of a global contraction while several large economies fall into recession wouldn’t necessarily be an unusual outcome. Since the 1980s, there have been nine advanced economy recession clusters, but only five of these have coincided with two or more consecutive quarterly falls in global per capita GDP – the benchmark for a global recession.
- It’s worth noting that all five US technical recessions since 1980 have coincided with a global recession. But we expect the upcoming peak to trough GDP fall in the US to be far smaller than in any of the previous five slumps. Therefore, it is reasonable to believe a global contraction could be avoided.
- However, it wouldn’t take much additional advanced economy weakness to mechanically push the world into recession. But risks aren’t solely tilted to the downside. In particular, a sharp drop in European energy prices and/or decisive action by governments to protect the economy from the energy shock could lead to milder recessions in Europe.
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