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Other countries are tipping into recession — and could drag the U.S. along

Lily Jamali Jun 20, 2023
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Germany is among the nations around the world facing a recession linked to their battles with inflation. Above, a Christmas market in Heidelberg. Daniel Roland/AFP via Getty Images

Other countries are tipping into recession — and could drag the U.S. along

Lily Jamali Jun 20, 2023
Heard on:
Germany is among the nations around the world facing a recession linked to their battles with inflation. Above, a Christmas market in Heidelberg. Daniel Roland/AFP via Getty Images
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Whether and when the U.S. economy will fall into a recession — and how severe a recession it might be — are all very much open questions.

But elsewhere in the world, those questions are already being answered. Who’s already having a recession, and what might it mean for us?

Here in the United States, we want other countries to stay out of recession, said Betsey Stevenson, professor at the University of Michigan’s Ford School of Public Policy.

“That makes it really easy for us to sell the things that we are best at creating around the globe,” Stevenson said.

But all is not well around the globe. New Zealand, for starters, has slipped into a recession.

That probably won’t cause big impacts here at home, said Bipan Rai, global head of foreign exchange strategy at CIBC. “The economy is relatively small compared to some of the other developed markets out there,” Rai said.

But he added that some of the factors that put New Zealand in that position are familiar: inflation and central bank efforts to beat it back by raising interest rates.

Inflation has helped tip Germany into recession too, said Carsten Brzeski, global head of macro for ING Research.

“High energy prices and high food prices have put a weight on private consumption,” he said.

Then, there’s the elephant in the room when it comes to global recession talk: China.

Wait … is China in a recession?

“We don’t know. If you trust Chinese statistics, maybe?” said Susan Aaronson, research professor at George Washington University’s Elliott School of International Affairs.

This much about China is clear, she said: “It is not the shiny, golden object for foreign investment that it once was.”

Half a year after the Chinese government lifted pandemic lockdowns, exports have fallen, as have prices. And unemployment among young people just hit a new record.

All of that is bad news for the U.S., Aaronson said. “We need each other to buy each other’s goods and services,” she added.

Unlike in China, though, labor markets are still faring OK in economies that have tipped into recession. And if those nations can recover quickly, “it can help make a U.S. recession less bad,” Stevenson said.

… If that much-anticipated but still-elusive recession ever materializes.

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