Around the world markets and economy are showing signs of impending Economic Recession that is to fall upon the world with a heavy arm.
According to US experts, the Federal Reserve will intensify its campaign of monetary tightening as never before in the past decade.
The research firm Ned Davis has predicted 98% chance for recession. They bring high historical credibility on to table with their rates rising only twice before – 2008 and 2020. When economists make such predictions, they base their assumption on certain indicators.
1) Dollar Rates: US$ is in its highest value in two decades enjoying an undisputed supremacy. From March the US central bank have increased the interest rates making it highly appealing to the investors. The turbulent climate of global pandemic and war condition in Eastern Europe made dollar a safer option to mark money. The British pound, the Euro, the Chinese yen, and the Japanese yen all depreciated as a result. As a consequence, the central banks of these nations were compelled to increase interest rates to protect the value of their respective currencies.
2) Reduction in spending: America – the biggest contributor to the world economy, halted its shopping spree. With the prices of commodity rising high people are reaching over to savings. Interest rates have risen at a historic pace, pushing mortgage rates to their highest level in more than a decade and making it harder for businesses to grow.
3) Corporate cost cut: Businesses in US has been booming during the global pandemic even when high inflation consumed huge part of the profit. But by mid September corporate America is showing signs of slowdown. FedEx unexpectedly revised its outlook warning that demand was softening, and earnings were likely to plunge more than 40%.
4) War & Policies: Nowhere is the collision of economic, financial, and political calamities more painfully visible than in the United Kingdom. Like the rest of the world, the UK has struggled with surging prices that are largely attributable to the colossal shock of Covid-19, followed by the trade disruptions created by Russia’s invasion of Ukraine. As the West cut off imports of Russian natural gas, energy prices have soared and supplies have dwindled.
While the consensus is that a global recession is likely sometime in 2023, it’s impossible to predict how severe it will be or how long it will last. Not every recession is as painful as the 2007-09 Great Recession, but every recession is, of course, painful.
Some economies, particularly the United States, with its strong labour market and resilient consumers, will be able to withstand the blow better than others. But the things are not looking pleasant for the world now. The challenges ahead will test the resilience of economies and societies.
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