Global Economy Weakest Since Financial Crisis… The Probability Of A Major Contraction In The Economy Shot Up To 73%, From Just 24% In December… Investors Are Starting To Become Concerned

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Global Economy Weakest Since Financial Crisis

(Bloomberg) — The global economy’s sharp loss of speed through 2018 has left the pace of expansion the weakest since the global financial crisis a decade ago, according to Bloomberg Economics.

Its new GDP tracker puts world growth at 2.1 percent on a quarter-on-quarter annualized basis, down from about 4 percent in the middle of last year. While there’s a chance that the economy may find a foothold and arrest the slowdown, “the risk is that downward momentum will be self-sustaining,” say economists Dan Hanson and Tom Orlik.

The reasons for hope? The Federal Reserve’s decision to pause its interest-rate hikes, a U.S.-China trade truce and the fading of the shocks that battered Europe in 2018 could mean stabilization is around the corner. Other central banks have also stepped up, with the European Central Bank last week announcing new measures to help the economy through the current weakness.

But the global economy is not out of the woods. The OECD’s latest composite leading indicator — published Monday — indicates easing momentum in the U.S., the U.K., Canada, and the euro area as a whole, including Germany and Italy. There are, however, signs of stabilization in China.

Despite the gloom, ECB policy makers have been keen to put a brave face on the deterioration, pushing the view the euro zone is experiencing a slowdown, not a recession.

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“We are still seeing robust economic growth, although it’s less strong than before,” Executive Board member Benoit Coeure said in an interview with Italian newspaper Corriere della Sera published Monday. “It will take longer for inflation to reach our objective, but it will get there. We are reacting to the developments we have seen so far.”

What Bloomberg Economists Say

“The cyclical upswing that took hold of the global economy in mid-2017 was never going to last. Even so, the extent of the slowdown since late last year has surprised many economists, including us.”

 

The probability of a major contraction in the economy shot up to 73%, from just 24% in December, says UBS

  • The probability of a major contraction in the economy shot up to 73%, from just 24% in December, says UBS.
  • “Weakness in the data is now fully consistent with a very real risk of a recession, whether one happens or not,” the bank economists said.
  •  Trade war tariffs a major factor, as is ‘sharp deterioration’ in consumer durables spending.

The chances of a US recession just spiked in the last month by a magnitude that UBS economists says shocked even them.

The probability of a major contraction in the economy shot up to 73%, from just 24% in December, says UBS. That’s the largest one-month jump in recession risk since 1989, the economists led by Pierre Lafourcade said in a March 7 report.

 

 


 

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