The UK is skydiving – can Europe follow suit? – Stock Exchange Forum

Recession fears linger, in fact, the anxiety is growing

In order to deal with high inflation, central banks have been raising the benchmark interest rate for several months. However, because of this aggressive lift, we can fall on the opposite side of the horse. Central banks slow down economies, but this can lead to a sudden recession. The Federal Reserve understands this, yet lowering inflation remains a priority. In November, there was finally some positive news regarding US inflation, which fell more than expected.


Painful data, we can expect a long recession

However, the situation is worse in the UK. The economy contracted in the third quarter, signaling the onset of a recession. The UK’s gross domestic product fell by 0.2 percent between July and September, after five consecutive quarters of growth, according to the latest figures. The UK is the only G7 economy that contracted in the third quarter. It is now 0.4 percent lower than it was at the end of 2019, before the coronavirus pandemic began. The driver behind the quarterly decline was manufacturing, which saw widespread declines across most industries.


However, the decline in GDP also reflects a slowing economy in a broader sense. Household income is shrinking due to record high inflation, interest rates are rising, and business and consumer confidence is weakening. The Bank of England warned last week that the British economy could face its longest recession since the 1940s.

The European picture is also changing


The European Commission warned that high inflation and higher interest rates are likely to push the eurozone into recession in the fourth quarter. They now expect inflation to peak at 8.5 per cent at the end of the year. However, according to the committee’s forecasts, GDP growth in the euro area may remain positive next year and 2024 as well. In contrast, the Bank of England expects the UK to see a recession that will last for up to two years.

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We are facing challenging times that will seriously test the resilience of economies and individuals.


Cover photo: Shutterstock

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