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Banking & finance
OpinionComment
David Brown
David Brown

Macroscope | We may not be headed for global recession gloom after all

  • The world is battening down for a long recession in 2023, but the winds may be changing direction
  • Energy prices and inflation levels appear to have peaked, interest rates are expected to do the same next year and there is even hope that 2023 will bring more easing of China’s zero-Covid policy

Reading Time:3 minutes
Why you can trust SCMP
The New York Stock Exchange on December 2. Investors are already anticipating Fed interest rate cuts next year. Photo: AFP
David Brown
It’s no wonder people are fretting about the future, but are we being too pessimistic about growth next year? We seem to be talking ourselves into trouble given the prevailing economic headwinds, but it doesn’t feel like a steep recession is imminent while global stock markets are looking reasonably robust and investors still moderately upbeat.
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Are stock markets our best leading indicator telling us to look beyond the near-term blues and begin factoring in brighter times ahead? After all, the worst of the bad news is probably already discounted over the Ukraine war, energy prices seem to have peaked, interest rates may be close to topping out, market volatility is down and so too is the safe-haven US dollar.

If there is a recession coming, it should be short and shallow and the glut of liquidity left over from collective quantitative easing should ensure that global recovery, when it comes, will still be flush with funds. It’s time to reassess the outlook.

The news has definitely made tough reading through most of the year. The shock of the Ukraine war, the spike in inflation, the drive for tougher monetary conditions by the central banks, and the downturn in global business conditions have, at times, seen investors, consumers and businesses running for cover.

The JP Morgan, S&P global manufacturing purchasing managers’ survey sums up the mood with the PMI index dropping below the vital 50 boom-or-bust threshold for the last three consecutive months, consistent with contracting business activity.

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The last time this global manufacturing PMI was in negative territory business confidence was in free fall at the height of the Covid-19 pandemic in 2020. This time though, things should be a lot different.

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