Possibility of Global Recession Seen as Coin Flip at Citi By Investing.com

© Reuters. UPDATE: Global recession risk seen as coin flip at Citi

By Louis Juricic

The probability of a global recession is approaching 50%, according to Citi economists. The bank joins a growing chorus of analysts and pundits warning of the dire effects tighter financial conditions could have on global economies.

During Senate testimony on Wednesday, US Federal Reserve Chairman Jerome Powell said the central bank was not trying to cause a recession while stressing that the priority was to fight inflation. This is a view shared by central bankers around the world.

“The global economy continues to be plagued by severe supply shocks, which are driving up inflation and dampening growth. But more recently, two other factors have burst onto the scene: central banks are raising policy rates with increasing vigor in their fight against inflation, and global consumer demand for goods appears to be slowing,” the report wrote. Citi economist Nathan Sheets in a note to clients.

Sheets added: “The experience of history indicates that disinflation often entails significant costs to growth, and we see the overall probability of recession now approaching 50%.”

The bank is seeing growing evidence of a slowdown in global consumer demand for goods, and retailers are beginning to complain about rising inventories, particularly of consumer discretionary goods. Reports also indicate a slowdown in consumer demand for smartphones and PCs.

On the positive side, the costs of shipping containers from China have recently come down, suggesting a potential reduction in pressures on supply chains.

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