The likelihood of a recession in Europe and the U.S.

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Is the world economy headed for a perfect storm, with downturns in Europe, China, and the US all happening at the same time later this year？ Every day, the chances of a triple-whammy of recessions around the world grow.

If the war in Ukraine gets worse and Germany finally gives in to calls to stop buying oil and gas from Russia because of the war, Europe will almost certainly go into a recession. China is finding it harder and harder to keep growing when strict Covid-19 lockdowns, which have already stopped Shanghai and are now a threat to Beijing, are in place. In fact, there may already be a recession in China. And since US consumer prices are rising at their fastest rate in 40 years, it looks less likely that prices will come down without a big hit to growth.

Private and official economic forecasts have recently started to point out that regional risks are growing, but they may be underestimating how much they add up. Widespread lockdowns in China, for example, will mess up global supply chains in the short term, leading to higher inflation in the US and less demand in Europe. Usually, these problems might be less severe if the prices of commodities were lower. But because there is no clear end in sight in Ukraine, food and energy prices around the world are likely to stay high no matter what happens.

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