Broken supply chain, due to war started by Russia, sanctions and
energy crisis already raised inflation in Euro area to the level which
haven’t been seen within the last decade. Would it lead to recession in
EU, USA or global in 2023?
Recession is one of the major threats seen by executives for the started
2023. Word recession in global news peaked last year
during June-July time according to google
trends. That peak is higher than it was during Covid onset (Mar
2020)
and similar to US-China trade war (Aug
2019) times.
US recession by the latest survey of business and academic economists
from WSJ
has 61% probability.Same experts expect the GDP growth to stagnate in
2023 with 0.2% growth in Q4 2023 vs 2022.
The
Economist points out to the surest
indicator of recession - gap between ten-year and three-month Treasury
yields which is
when negative 8 out 9 times have been followed by a recession.
However Goldman and Sachs in their 2023
outlook set probability for US recession about 35%, while Euro Area
and UK are in recession.
Bloomberg
collected 175 summaries from various analytic firms. Below is a quick
sentiment analysis of those summaries, which requires more fine-tuning
though. Clearly the key indicators to watch will be: how FED and ECB
will fight inflation, what will be the evolution of war conflict in
Ukraine and how China will reopen.
Recently published report on unemployment in US add optimism to some analyst Report says in Jan 2023 it is the lowest unemployment (3.4%) rate since 1969.
Stock Market Indexes, however demonstrated slight pessimism over last
three weeks, downwards trends observed for S&P 500 and FTSE 100.
Commodities indexes, though staying below it’s peak (Jun 2022) went up
within same period.
Analysts
expect
a rise of rate from FED’s meeting on 22nd of March by 25pp. Though
inflation goes down it doesn’t go sufficiently close to the target
neither in EU nor in US.
The uncertainty is still very high, while business might have think that inflation rise is close to the end central banks afraid to declare a victory. Wage growth might push the inflation above the target. Possible shocks are still plausible: if China would increase it’s demand due to rebound and gas price might soar next winter for Europe as there is still lack of supply in a long term.