Leaders | After the downturn

The silver linings of a recession

Lower inflation and greener energy are worth the price of a short downturn

Traders work on the floor at the New York Stock Exchange in New York, Wednesday, July 27, 2022. (AP Photo/Seth Wenig)

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"

Summer double issue

From the July 30th 2022 edition

Discover stories from this section and more in the list of contents

Explore the edition

More from Leaders

Should American universities call the cops on protesting students?

The principles involved in resolving campus protests are not that hard

Japan is wrong to try to prop up the yen

Supporting the currency is expensive and futile


The wider lessons of Scotland’s political turmoil

Humza Yousaf’s resignation is the latest in a string of setbacks