The silver linings of a recession
Lower inflation and greener energy are worth the price of a short downturn
Predicting a global recession usually means standing out from the crowd. Today it is those saying the world economy will avoid a downturn who are sticking their necks out. America’s Federal Reserve is leading a broad charge to tighten monetary policy, and has raised interest rates by 2¼ percentage points since March. It is expected to impose another point of tightening by December. Europe is short of natural gas because of falling supplies from Russia. Chinese growth has slowed sharply as a result of the lockdowns that stem from its zero-covid policy, and worries are mounting over its fragile property markets.
So gloomy is the mood that many investors are asking whether a recession has already arrived. It is a hard question to answer. The pandemic has played havoc with economic indicators. Inflation has caused consumer confidence to plunge, but when asked about their personal finances rather than the whole economy, people are much cheerier. America’s disappointing gdp figures do not tally with other measures of output or employers’ growing payrolls. Manufacturing surveys register their weakest results since the early days of the pandemic, but that may be because consumers are still rebalancing their spending after the worst phase of the pandemic (there is less buying of home-gym equipment, but more queuing in airports). Even China’s slowdown could help Europe narrowly, by reducing global demand for liquefied natural gas.
This article appeared in the Leaders section of the print edition under the headline "After the recession"
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