It’s been a rough couple of weeks on the stock market, ending recently with a warning from FedEX about a downturn in the global economy that sent shares tumbling.
FedEx CEO Raj Subramaniam said on CNBC that he believed a recession was impending for the global economy. He cited the company’s weakening global shipment volumes as a reason for his prediction.
“We are a reflection of everybody else’s business, especially the high-value economy in the world,” he said.
Transportation stocks are typically seen as a leading indicator for the economy. However, as an article in Barron’s asked, “Is It the Economy Or the Company?” So far, it appears investors think it is more the economy, with UPS and other transportation stocks hit hard.
Q: Could we be heading to a global recession?
Chris Van Gorder, Scripps Health
YES: I believe it will be extraordinarily difficult for central banks to raise interest rates sufficiently to reign in inflation without slowing economic growth to a level that results in a global recession. A tight labor market and continued energy and food supply chain disruptions will only exacerbate the issue.
Norm Miller, University of San Diego
YES: According to several European economist panels, there is near certainty that Europe will soon be in a recession. Measures to dampen inflation are not free and will slow economies in Asia and all the Americas. Disastrous effects from the Russia-Ukraine war will include famine in Africa, uncertain energy prices globally and deaths from a lack of heat this winter. The IMF has the global GDP growing at 2.9 percent in 2023. This will more likely be revised closer to zero.
Jamie Moraga, IntelliSolutions
YES: While the FedEx CEO sounded the alarm on a possible global recession due to decreased shipping volumes, the WTO’s Goods Trade Barometer reported that global trade growth is stagnating. Continued uncertainty can be attributed to the Ukraine/Russian war, high inflation, and central banks’ efforts to tighten monetary policies (i.e. increase interest rates). Add in a lingering pandemic and its ripple effects, and you have the potential for a global recession. While unemployment remains low, there’s still concern about the risk of stagflation.
David Ely, San Diego State University
YES: The probability of a global recession within the next year has certainly increased. Persistently high inflation will discourage spending by consumers and lead many central banks to hike interest rates. Elevated energy prices will continue to negatively impact global growth, especially in Europe. High food prices will hurt developing economies. Supply-chain disruptions seem likely to continue into next year. COVID-related restrictions and problems in the real estate sector will constrain growth in China.
Ray Major, SANDAG
YES: The global economy is at high risk of entering a recession. We are in dangerous territory with considerable economic challenges, specifically in the U.S., China, and the Eurozone. These challenges, coupled with rampant inflation in many countries, rising interest rates, the war between Russia and Ukraine, and continued zero-Covid policies in some countries still impacting the supply chain, will most likely trigger the next global recession.
Caroline Freund, UC San Diego School of Global Policy and Strategy
YES: All three major global economic engines — the U.S., China, and Europe — are facing challenges. High inflation in the U.S. means the Fed will need to keep raising interest rates, with a recession looking increasingly likely. China is dogged by a property crisis, COVID lockdowns, and trade tensions. Surging energy prices from Russia’s invasion of Ukraine are depressing European production and consumer sentiment. Developing countries are also struggling with soaring fuel and food prices.
Haney Hong, San Diego County Taxpayers Assoc.
YES: “FOMO” — fear of missing out — makes global recession prophecies self-fulfilling. Consider 2020’s toilet paper crisis: a few bought more TP to “be ready” for an emergency. Then, TP ran a bit shorter than usual; media covered it and activated FOMO. We all bought more, and voila, we fulfilled the silliest crisis ever discussed. If that’s what FOMO on a clean bottom can do, imagine what FOMO on the global economy will do.
Kelly Cunningham, San Diego Institute for Economic Research
YES: Flooding the world with unequaled amounts of fabricated money while shutting businesses down and attempting to stop the spread of COVID resulted in steep price increases. Further stimulating the crippled economy left distorted, overextended, and unsustainable conditions as the inflation conflagration becomes long-term malaise for the global economy. The continual monetary stimulus will inevitably crash and fall into recession. The inevitable result is widespread recession adjusting to substantial increases in dollars without corresponding increases of goods.
Lynn Reaser, economist
YES: China’s economy is slowing under the pressure of a worsening property market, COVID lockdowns, and attacks on the tech sector. In the U.S., the Fed will have to keep raising interest rates to slow underlying inflation. High mortgage rates will hurt housing. Inventories of some consumer goods have backed up. In Europe, high natural gas prices are hammering the economy. A global recession, even if relatively mild, will be hard to avoid.
Phil Blair, Manpower
NO: And let’s be sure we don’t talk ourselves into one. A soft landing, slowing of growth or slight dip in the economy is a far thing from a recession. We clearly need to get inflation under control, lower and stabilize oil and gas prices by encouraging (imagine if we could get Venezuela or Iran’s production back in the market) and averting calamities like railroad worker union strike. The labor market participation is finally beginning to creep up, which means more workers in the job market, which should result in less wage inflation. Let’s focus on the positive and make our economy even stronger.
Gary London, London Moeder Advisors
YES: A global recession, yes. A local recession, not so fast. China and Europe are in recession, which will intensify. The U.S. economic picture is blurry. Avoiding recession to achieve a “soft landing” is going to be tricky as the Fed continues to tamp down inflation. Better analogy is Tom Cruise landing in turbulence on an aircraft carrier. Watch consumer sentiment. The positive economic indicators, such as high employment, may be superseded by energy and food costs.
Alan Gin, University of San Diego
YES: Inflation has reached decade’s highs around the world due to the war in Ukraine and climate issues. This is negatively impacting consumers’ buying power. This combined with interest rate increases by the Fed could push the global economy into a recession. Contrary to popular belief, the U.S. economy is not officially in a recession even with two quarterly decreases in GDP. Employment, industrial production, and real consumption expenditures are up since the beginning of the year, which would not happen in a recession.
Bob Rauch, R.A. Rauch & Associates
YES: There will be a global recession in 2023 but it will be caused largely by factors that are external to the U.S. The war in Ukraine and China’s zero COVID tolerance policy, coupled with the Fed’s increases in interest rates will push us into a very short, mild recession in early 2023. The economy here will continue to grow despite weak leadership and a Fed that continues to raise rates without waiting to see the impact.
James Hamilton, UC San Diego
YES: We’re not there yet. A lot of people jumped the gun in declaring that a recession started in January, despite the fact that unemployment remains near record-low levels and job growth continues strong. But with the Fed hiking interest rates further, the disruptions to China’s economy from COVID-related lockdowns, and the energy challenges that Europe will face this winter, it will be hard to keep the growth.
Austin Neudecker, Weave Growth
YES: With strong employment and continued inflation, the recent market declines are not typical. I remain concerned that the rapid increase of interest rates will squelch investment. Early stage investments are already down substantially, larger private company valuations are uncertain, and public technology stocks (which led the way previously) are hurting. I do not see a path where the Fed quickly stops inflation without creating a recession. I hope other indicators alleviate the extent of the damage.