GOOD NEWS AND BAD NEWS: TAKE YOUR PICK

Recession is in the news but there is no consensus as to when this might occur. The good times may be over before they really took hold.

The bad news is that institutions are beginning to bring up the subject of an impending recession. The problem is that there is no consensus of when this might happen.

The good news is that most of the G7 economies are doing well in terms of employment, economic expansion, and investment.

According to data from the UK House of Commons Library, In Q4 2021, UK GDP grew by 1.3 per cent compared with the previous quarter (Q3 2021). Eurozone GDP grew by 0.3 per cent, despite a 0.3 per cent decline in Germany. In the US, GDP growth of 1.7 per cent was recorded. Towards the end of January, the International Monetary Fund (IMF) projected global GDP growth at 4.7 per cent, down from its previous 5 percent. The UK is projected to have the strongest growth followed by the Eurozone and then the US. This was before the Russian invasion of the Ukraine. The OECD estimates that global GDP growth estimates would be reduced by 1 per cent because of the war a result of inflationary pressures leading to less demand for goods.

The “bad” news folks are consistent about the pressures on economic expansion that could lead the world into a recession. The primary one is inflation, worsened by the Ukraine war which is hitting energy commodities as well as the agricultural sectors. Their view is that central banks will focus on lowering inflation as quickly as possible back to the 2.1-2.5 per cent targets and that they may do this by hitting the brakes too hard by raising interest rates and taking money out of the national economies. Added to this is the devasting impact of Zero tolerance for Covid in China which has seen the total shut down of the Shanghai region with some 26 million people isolated in their homes. This has virtually stopped industrial production and the service industry and will certainly have a recessionary impact.

There is no consensus as to when the recession will take effect. One major Wall Street bank suggests sometime next year, others are thinking of the latter part of this year. Take your pick.