Warnings of possible recession pile up for global economy
- 5 years ago
Warnings that signal an impending global recession, measured as two consecutive quarters of contraction, are blaring around the world.
Our business correspondent Kim Hyesung has this report on the signals to look out for... and reasons for the slowdown
The U.S. bond market is sounding the alarm of a possible recession.
The spread between the 2-year Treasury yield and the 10-year yield inverted for the first time since 2007 on August 14th.
"An inverted yield curve is a bellwether for an economic recession. Long-term bills have higher risk premiums and therefore lower yields. But a higher 10-year yield means investors believe they will make more by holding a longer-term treasury, expecting the value of the short-term bills to plunge as the economy slows."
According to Credit Suisse, the last five inverted yield curves all led to recessions that happened an average of 22 months following an inversion.
Britain also saw an inverted yield curve and Germany's treasury bond yields are heading further down into negative territory.
The price of gold, the go to safe-haven for many investors, is at a six-year high.
The real economy is also losing steam.
China saw its second quarter growth hit its slowest pace in near 30 years.
South Korea recorded negative growth in the first quarter.
Two other export powerhouses, Germany and Singapore, also saw their economies contract in the second quarter on falling global demand.
While the U.S. is still enjoying solid economic growth, its manufacturing August PMI fell below the 50 mark for the first time since 2009, indicating a near-term manufacturing contraction.
"The problem of low productivity and the widening wealth gap remains unresolved since the 2008 global financial crisis. Interest rates are at record lows, yet supply is higher than demand. In addition, new factors like the U.S.-China trade war are accelerating the slowdown."
The U.S.-China trade spat has not only led to higher tariffs between the world's two largest economies, hurting consumers and exports, but also added uncertainties to businesses, driving down investment.
A no-deal Brexit, pro-democracy protests in Hong Kong and tensions between South Korea and Japan also add to downside risks.
It remains to be seen whether the warning signs will lead to a recession, but rising populist sentiment and protectionism is making it harder for world leaders to work in unison to support the global economy.
Kim Hyesung, Arirang News.
Our business correspondent Kim Hyesung has this report on the signals to look out for... and reasons for the slowdown
The U.S. bond market is sounding the alarm of a possible recession.
The spread between the 2-year Treasury yield and the 10-year yield inverted for the first time since 2007 on August 14th.
"An inverted yield curve is a bellwether for an economic recession. Long-term bills have higher risk premiums and therefore lower yields. But a higher 10-year yield means investors believe they will make more by holding a longer-term treasury, expecting the value of the short-term bills to plunge as the economy slows."
According to Credit Suisse, the last five inverted yield curves all led to recessions that happened an average of 22 months following an inversion.
Britain also saw an inverted yield curve and Germany's treasury bond yields are heading further down into negative territory.
The price of gold, the go to safe-haven for many investors, is at a six-year high.
The real economy is also losing steam.
China saw its second quarter growth hit its slowest pace in near 30 years.
South Korea recorded negative growth in the first quarter.
Two other export powerhouses, Germany and Singapore, also saw their economies contract in the second quarter on falling global demand.
While the U.S. is still enjoying solid economic growth, its manufacturing August PMI fell below the 50 mark for the first time since 2009, indicating a near-term manufacturing contraction.
"The problem of low productivity and the widening wealth gap remains unresolved since the 2008 global financial crisis. Interest rates are at record lows, yet supply is higher than demand. In addition, new factors like the U.S.-China trade war are accelerating the slowdown."
The U.S.-China trade spat has not only led to higher tariffs between the world's two largest economies, hurting consumers and exports, but also added uncertainties to businesses, driving down investment.
A no-deal Brexit, pro-democracy protests in Hong Kong and tensions between South Korea and Japan also add to downside risks.
It remains to be seen whether the warning signs will lead to a recession, but rising populist sentiment and protectionism is making it harder for world leaders to work in unison to support the global economy.
Kim Hyesung, Arirang News.