A global recession isn’t inevitable

WE CONTINUE to believe the global economy will narrowly avoid a recession, despite expecting the United States, Canada, and most of Europe to fall into recession at some point over the next year or so.

Avoidance of a global contraction while several large economies fall into recession wouldn’t necessarily be an unusual outcome. Since the 1980s, there have been 9 advanced economy recession clusters, but only 5 of these have coincided with 2 or more consecutive quarterly falls in global per capita gross domestic product (GDP) – the benchmark for a global recession.

It’s worth noting that all 5 US technical recessions since 1980 have coincided with a global recession. But we expect the upcoming peak-to-trough GDP fall in the US to be far smaller than in any of the previous 5 slumps. Therefore, it is reasonable to believe a global contraction could be avoided.