Piper Sandler chief global economist Nancy Lazar warned that a global recession is currently in its early stages. Lazar described the initial stages as “very significant” and “synchronized.”
Global Recession Expected
Lazar appeared on “Mornings with Maria” last Monday. She noted that a global recession is now in its early stages. In particular, the crisis will hit Europe and possibly China.
“It’s going to be a global recession pulling down [the] Euro zone in particular,” Lazar said. “It looks like China GDP (sic) in the second quarter could also be negative.”
Lazar also reported mixed sentiments for the United States. “Now we think the United States could not go into a recession. We have still plus 1% GDP for the U.S. this year,” she said.
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“But that’s still a very significant slowdown from roughly 6% last year to one,” Lazar added. The Piper Sandler economist noted that a 1% GDP growth will feel “very, very weak.”
The US Also Experienced Fears of Recession in 2016
Lazar noted that the United States faced “a similar situation back in 2015” about an economic slowdown. In fact, the country was awash in recession fears in 2016.
However, the US managed to avoid a recession that year. Lazar said that the US economic backbone was pretty healthy at the time.
Today, she thinks the case is much the same. However, those outside the US are not so lucky. A global recession, especially in the Eurozone, is underway.
The US government revised the country’s economic growth rate to slightly higher numbers in the last quarter of 2021. This helped the US record its best year of growth in almost 40 years.
However, a renewed outbreak of COVID again affected consumer spending and affected the global supply chain once again.
Gross Domestic Product (GDP) grew by 7% on an annualized basis in the fourth quarter. In contrast, the US economy grew only by 2.3% in the third quarter.
Oil Prices Falling As the US Fights Inflation By Raising Interest Rates
On Monday, oil prices fell yet again. In fact, US crude prices reported dropping below the $100 per barrel benchmark. Many traders are now seeing lowered demand for oil after enduring prices of above $130 per barrel.
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China is currently dealing with another COVID epidemic within its borders which is affecting its appetite for oil. In addition, economists are looking at the US to raise interest rates by 0.50% by May.
The rate at which the Federal Reserve is raising interest rates is at its fastest pace in over twenty years. After the May increase, the Fed plans to raise rates at least three more times by 50 basis points each.
By September, experts believe that the federal funds rate will hover between 2.25% to 2.5%. During the pandemic, the federal funds rate stayed at near zero rates.
Lazar: ‘Lower Inflation Is Coming’
As a result of the belt-tightening by the Fed, Lazar said that the US will experience lower inflation soon. “I think we are going to have significant goods deflation,” she said.
Specifically, she referred to the decreasing prices of used cars. “We’ve seen used cars decline 6% just in a few months,” she noted. In addition, she also expects price drops to happen in other industries as well.
However, deflation does come with some negatives. On one hand, prices of goods and services will definitely drop to more manageable levels.
However, deflation also means that companies will suffer declines as well. Company earnings will take a hit due to weaker demand and lower prices.
Watch the Fox Business video reporting that recession is expected outside the US: Nancy Lazar
Do you agree that a global recession is underway? Do you agree with Lazar that the United States can still escape a recession even if other countries won’t?
Tell us what you think. Share your thoughts in the comments section below.