The question is no longer about the possibility of the world entering a recession, but rather “when” the recession will occur.
With the repeated assertion by the US Federal Reserve that it will continue to tighten monetary policy for the largest economy in the world in order to curb inflation, the research company “Ned Davis” believes that the chance of a global economic recession has risen to 98 percent, a percentage that the company has not previously announced except In the years 2008 and 2020.
In its warning of global recession, the company clarified, according to a report published by CNN, that the assessment it relied on was based on 5 main indicators.
strong US dollar
The strength of the US dollar has increased significantly and higher than it was in the past two decades, due to the tendency of the US Federal Reserve to increase interest rates aggressively, which increases the attractiveness of the green currency, which plays a large role in the global economy.
Although the strength of the dollar is beneficial for Americans who travel abroad, it is considered a problem for other countries of the world, as it increases the cost of importing basic items, such as food and fuel, and affects other currencies, as the value of the pound sterling, the euro, the Chinese yuan and the Japanese yen has declined against dollar.
The dollar’s strength also indicates the stability of stock indices on Wall Street. According to a report issued by “Morgan Stanley”, every 1 percent rise in the dollar index has a negative impact on the profits of the “Standard & Poor’s 500” index by 0.5 percent.
The main engine of America’s economy has been disrupted
Spending is the main driver of the US economy, but the rise in prices of almost all goods during the year, with wages not keeping pace, has slowed the pace of consumption.
Although higher interest rates are generally offset by lower costs, investors face the double difficulties of higher rates and higher interest rates for borrowing.
Companies in the world’s largest economies
Business in the US has been booming this year, despite the increase in interest rates.
But in mid-September, FedEx released a shocking report explaining its downgrade of the company’s expected revenue and profit, which could drop by more than 40 percent as a result of the looming global recession.
Apple also decided to cancel its plans to increase production of “iPhone 14” due to weak demand compared to expectations.
US stock indices
In 2021, US stock markets saw big gains, with the Standard & Poor’s 500 index jumping 27 percent during the year.
However, the performance of the indicators this year was completely different, due to the very high inflation rates in America, which caused the US Federal Reserve to abandon the policy of buying bonds that supported the market in 2021, and to raise interest rates.
The index, which has fallen by about 24 percent since the beginning of the year, is heading for its worst performance since 2008.
United kingdom
Britain’s economy suffers from many economic, financial and political problems, as well as negative effects that have been directly reflected on the country, which are the consequences of the Corona epidemic, the supply chain crisis and the war in Ukraine.
After Liz Terrass assumed the presidency of the British government, she announced a plan aimed at reducing taxes on the British to encourage spending and investment, with the government borrowing to finance the tax gap.
The Truss plan was in direct conflict with the policy of the Bank of England, which raises interest rates and implements a tight monetary policy, which increased investor fears and led to the sterling’s decline to a record low against the dollar.
The British are also suffering from a crisis represented by the high cost of living, due to the increase in inflation at rates that are the highest among the Group of Seven countries, which increases the fears of individuals about the high costs of borrowing, with the British Central Bank continuing to raise interest rates.
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