Are We Nearing a Global Economic Downturn?

The war in Ukraine, supply chain problems caused by the pandemic, and soaring energy prices are increasing the risk of a global recession.

• On Thursday, news emerged that the US economy shrank by an annualized rate of 1.4% in the first quarter of 2022, surprising analysts who expected modest growth of 1%.
• Many economists said underlying indicators for the US economy remained strong, and that it’s unlikely the US will slip into recession—two consecutive quarters of economic decline.
• But the slowdown still illustrated the rising risk of a prolonged downturn in the US and beyond due to high inflation—the rising cost of goods and services—and the rate hikes used to combat it.
• The US isn’t alone in facing the risk of a downturn. The spread of the coronavirus in Beijing and Shanghai—and the draconian lockdowns imposed by authorities—is raising fears of recession in China.
• Rising energy prices and supply chain disruptions, stemming largely from the war on Ukraine, have raised the recession risk in Europe too. Germany earlier this week slashed its growth forecast.
• In a highly interconnected global economy, trouble in one region is likely to reverberate across the rest of the world, puting the strong post-pandemic recovery at risk.