Mandeep Singh  Ghotra PREC*

Mandeep Singh Ghotra PREC*

REALTOR®

Century 21 Coastal Realty Ltd., Brokerage*

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778-968-0653
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Mandeep Singh  Ghotra PREC*

Mandeep Singh Ghotra PREC*

REALTOR®

Century 21 Coastal Realty Ltd., Brokerage*

Mobile:
778-968-0653
Office:
604-599-4888
Email Me

Posthaste: Recession coming in next year for Canada and the world, more economists warn If there is a recession, we could be in

Source  - financialpost.com

The drumbeats warning of a coming recession are getting louder and more persistent.

The toll taken by the rising cost of living and tightening financial conditions around the globe are prompting more economists to sharply downgrade their outlooks.

Former Treasury Secretary Lawrence Summers told Bloomberg TV that there’s an increasing risk the recession he expects will start sooner, in 2022.

“The risks of a 2022 recession are significantly higher than I would have judged six or nine weeks ago,” Summers told Bloomberg Television’s “Wall Street Week” with David Westin. “If the economy did go into recession in the next six to nine months, then you’d probably see a reduction in inflationary pressures.”

The Institute of International Finance, a global association for the financial industry, has been warning of the risks of a global recession for some time, but recently turned up the volume because of disturbing new data.

Weeks ago the IIF predicted that Russia’s invasion of Ukraine and China’s COVID lockdowns would cause global growth in 2022 to flatline.

“Since we made this forecast, however, it has been U.S. data that have surprised to the downside the most,” IIF economists said in a note Thursday.

“The rapid slowdown in the U.S. pushes our global growth forecast from near zero into outright contraction.”

Consumer confidence has tumbled as the U.S. housing market enters “deep recession” driven by the steepest rise in real mortgage rates since at least 2010, said IIF.

The risk of global recession has been compounded by weak data out of Europe. Factory orders in Germany have fallen to levels not seen since the 2008 financial crisis, aside from the sharp drop in 2020, while German consumer confidence has sunk below the levels of the initial COVID shock, “which is remarkably bad,” they said.

The biggest question mark in the IIF forecast is China, where much depends on the spread of the omicron virus. But one thing is becoming clear, they said; unlike the first wave of COVID in 2020, the weakness in China’s data in both manufacturing and services looks set to be drawn out.

“Whatever happens, China is unlikely to be a source of stimulus as global recession builds,” said the IIF.

Analysts at Nomura Holdings Inc see major economies, including Canada, entering recession over the next 12 months, Bloomberg reports.

“Increasing signs that the world economy is entering a synchronized growth slowdown, meaning countries can no longer rely on a rebound in exports for growth, have also prompted us to forecast multiple recessions,” they wrote.

There were signs last week that Canada’s economy was losing momentum when Statistics Canada released a preliminary estimate that GDP contracted 0.2% in May. This weakness was partly from the temporary effects of oil and gas output that month, but the slowdown also reflects the impact of the decline in Canada’s housing market, said Capital Economics’ Stephen Brown.

Home sales fell 9% in May from the month before, shaving 0.1% off GDP, he said. “With the business surveys for June also showing a loss of broader momentum, the economy may be slowing even sooner than we anticipated,” said Brown.

Not everyone expects a recession.

Deloitte Canada’s chief economist Craig Alexander thinks that a period of stagflation, where growth slows, but inflation stays relatively high, is more likely.

He argues that increased household savings and wealth, and low unemployment, which is likely to stay low as baby boomers age, will give the economy resilience. Deloitte economists put the odds of a slowdown at 60% and the odds of a recession at 40%.

“It’s important to remember that recessions can be psychological events. The self-fulfilling prophecy occurs when everyone expects a recession and acts as if one will occur,” Alexander wrote.

If there is a recession, Canada could be in for a bad one, says Nomura. Canada, Australia and South Korea face the risk of deeper downturns if rising interest rates trigger a housing bust,  analysts said.

For the U.S., they see a shallow but long recession of five quarters starting from the last quarter of this year, Bloomberg reports.

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Designation: MBA

Education: University of British Columbia

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