40% possibility of the USA slipping into a recession: Bloomberg
27 Jul 2022 13:54:48
Washington D.C., Jul 27: The global economy is in the grips of a serious slowdown, with some key economies at high risk of recession and only sparse meaningful cooling in inflation over the next year, according to Reuters polls of economists.
Most central banks are only part-way through a still-urgent cycle of interest rate rises as many policymakers make up for a collective error in judgment last year thinking supply chain-related inflation pressures would not last.
That carries with it another risk - central banks moving too quickly without taking time to assess damage from the fastest interest rate rises in more than a generation following over a decade of near-zero rates. Despite their aggressive response - in some cases, the most in several decades - inflation has yet to ease in most of the near-50 economies covered in the June 27-July 25 Reuters surveys of more than 500 forecasters around the world. The US Federal Reserve, due to hike rates by another 75 basis points later on Wednesday, is a case in point. Inflation there, currently at a four-decade high of 9.1 percent, is not expected to cool to the Fed's 2 percent target until at least 2024. Soaring inflation has turned into a serious cost of living crisis in much of the world, pushing up recession risks. There is already a median 40 percent chance of recession happening in the world's largest economy in the coming year, up sharply from three months ago, and those changes have risen for the eurozone and Britain too. "Recessionary dynamics are increasingly evident in our forecast. Notably, we now see several major economies - including the United States and the euro area - slipping into recession. Even so, the timing of these downturns varies, and they are expected to be relatively mild," noted Nathan Sheets, chief global economist at Citi. "By any metric, the global economy is slowing and prospects are deteriorating. The global recession is, indisputably, a clear and present danger."
Global growth is forecast to slow to 3.0 percent this year followed by 2.8 percent next, both downgraded from 3.5 percent and 3.4 percent in the last quarterly poll in April. That compares with the International Monetary Fund's latest forecasts of 3.2 percent and 2.9 percent. Of the 48 economies covered, 77 percent of growth forecasts were downgraded for next year with only 13 percent left unchanged and 10 percent upgraded.