Pan-Atlantic recession ‘increasingly likely’, warn economists
The risks of the US and Europe sliding into recession have risen sharply, economists have warned ahead of the G7 summit that begins on Sunday.
Economists on both sides of the Atlantic told the Financial Times they had become increasingly pessimistic after the Federal Reserve’s jumbo rate rise to counter soaring inflation, and as concerns mounted over the security of European gas supplies this winter as Russia reduces exports.
Holger Schmieding, chief economist at Berenberg Bank, said the balance had “tipped” in favour of an economic contraction next year in the US and Europe. “What used to be a rising risk has now turned into the base case.”
Goldman Sachs doubled the risk of the US entering a recession this year from 15 per cent to 30 per cent, with a 48 per cent probability of a recession over a two-year horizon in the wake of the Fed’s first 75 basis point rise since 1994.