Global recession still uncertain, data shows
LONDON — A global recession looked like a no-brainer just a few weeks ago, but that picture has changed dramatically.
Warmer temperatures and well-filled gas storage facilities mean there’s less concern about power shortages and sky-high energy bills.
That, along with China reopening its economy at breakneck speed, promises a boost for export-oriented economies.
In Europe, there was unexpected news that business activity returned to modest growth in January, adding to signs the downturn in the bloc may not be as deep as feared and that it may escape recession.
S&P Global’s flash Composite Purchasing Managers’ Index, seen as a good gauge of overall economic health, climbed to 50.2 this month from 49.3 in December.
It was the first time the index has been above the 50 mark, which separates growth from contraction, since June and the reading was ahead of the median Reuters poll forecast of 49.8.
Solid GDP growth
In the United States, economic managers said their gross domestic product (GDP) maintained a strong pace of growth in the fourth quarter as consumers boosted spending on goods despite higher interest rates eroding demand.
Still, the advance report on US GDP growth report on Thursday could mark the last quarter of solid growth before the lagged effects of the Federal Reserve’s fastest monetary policy tightening cycle since the 1980s kick in.
Most economists expect a recession by the second half of the year, though mild compared to previous downturns.
Also on Thursday, the South Korean government estimated that their GDP shrank 0.4 percent in the last quarter of 2022—its first economic contraction in two and half years—due mainly to a crash in exports, and faced a possibility it was in recession.
Divided
Economists usually define a recession as two or more successive quarters of contraction.
In Japan, monetary authorities also remained divided on prospects for achieving their 2-percent inflation target with some warning that it could take time for wages to rise sustainably.
The divergence in views highlight the challenge policymakers face in determining whether the recent rise in inflation will shift to one backed by robust demand and higher wages—a prerequisite for raising ultra-low interest rates.
At the January meeting, many board members agreed on the need to retain ultra-loose monetary policy to support the economy and help companies raise pay, the summary showed.
While some in the nine-member board pointed to broadening price hikes and heightening prospects of wage increases, others said price growth will begin to slow as cost-push pressure eases, the summary showed.
