ARTICLE: Is the global recession late?

7 Nov 2019

 

There are ‘’rumors’’ for some time now that we will be facing the recession soon. But no one know when, where and how long. So where are we standing now? Are we on the way to the new recession, or this were just exaggerations?

 

AGN Global Survey was investigating the question ‘’Where is the recession?’’. They conducted a survey, where global panel of SME business advisers participated – senior accountancy and business advisory professionals, from leading financial advisory and consultancy firms across the world.

 

At this point, we are facing inconsistent indicators across the world, so unified answer cannot be given. Here is the example of inconsistency – Germany is predicted to go into recession by the next quarter technically, but the UK economy, which was shrinking in the second quarter, showed signs of the growth in the third. Dampening effect is also caused by Brexit and US/China trade wars.

 

In order to have a deeper understanding of the issue, AGN Global Survey posed questions to the panel regarding consumer confidence, productivity, housing market, auto sales, government intervention, yield curve and other investment indicators. With assessing those factors, we could have a clearer picture regarding the recession.

 

Consumer confidence impacts people’s economic decisions – their spending activities. On a global scale, at this point, there is no significant change in spending habits. There is also no significant change in productivity – efficiency in using labor to produce output. Another key factor that could be an indicator of a recession is a housing market. In some economies, there is a strong relationship between the domestic housing market and the overall health of the economy. At the moment, not even this indicator is showing signs of the world going into recession. There is one factor, that panel was not clear in which phase the market is. Regardless of the state of the economy, the industry is beset with huge problems. That is why maybe car sales are not the reliable indicator of economic growth, as once we thought they were. Government interventions are often starting economic growth through various fiscal strategies. Many of these initiatives were implemented in the last world-wide recession, so it is possible that their effects are fading, or actually holding back a recession. With all that in mind, this indicator is also unclear to predict upcoming situation. Last indicator, that was considered in the Survey, was yield curve and other investment indicators. Yield curve, stock market growth, investment returns and central bank interest rate trends are all pointers to whether a recession is imminent. Those indicators could be the most decisive ones, and in this matter, they show that we are approaching a recession.

 

Taking into consideration all indicators and facts, we have a mixed and unclear picture whether we are facing the recession or not. Survey reflects current paradox of apparent fears of the markets and indicators suggesting a recession is imminent, while actual real-world factors like productivity, suggest it is still a while off. If we look at things only ‘’technically’’, we are due a recession, because we have come to the end of the typical 10 to 12-year cycle. The catch is, that investment indicators are showing that the recession is around the corner, but the patterns of actual human behavior shows different picture. What we know for sure, the economic downturn will happen, but we still don’t know when.

 

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.

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