Chance of Global Recession Seen as Coin Flip at Citi

The chance of a global recession is nearing 50%, according to economists at Citi. The bank joins a growing chorus of analysts and pundits warning about the dire effects tighter financial conditions could have on world economies.

In Senate testimony Wednesday, U.S. Federal Reserve Chairman Jerome Powell said the central bank was not trying to provoke a recession while stressing the priority was fighting inflation. It’s a view shared by central bankers around the world.

“The global economy continues to be afflicted by severe supply shocks, which are pushing up inflation and driving down growth. But more recently, two further factors have burst onto the scene: Central banks are hiking policy rates with increasing vigor in their fight against inflation, and the global consumer’s demand for goods looks to be softening,” wrote Citi economist Nathan Sheets in a note to clients.

Sheets added, “The experience of history indicates that disinflation often carries meaningful costs for growth, and we see the aggregate probability of recession as now approaching 50%.”

The bank is seeing increased evidence of softening in the global consumer’s demand for goods, and retailers are starting to complain about rising inventories, especially of consumer discretionary goods. Reports also indicate a slackening of consumer demand for smart phones and PCs.

On the bright side, container shipping costs from China have recently moved down, which hints at potentially reduced pressures on supply chains.

By Louis Juricic

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