Are We Entering a Recession?

It’s a question that’s been on everyone’s lips: Are we headed for a recession? Some experts are calling it a Slowcession, Richcession, or just plain old recession, but the signs are there.

Data released on the first Monday of April showed that the monthly change in US bank deposits was negative $389 billion, the sharpest dip in over 50 years. That’s a pretty clear warning sign.

But it’s not just the bank deposits that are causing concern. The money supply growth in the US is at a negative 2%, matching the rate observed during the Depression of 1921. That’s not something to be taken lightly.

Then there’s the spread between the US 10-year Treasury bond and the 30-year mortgage rate, which has reached levels not seen since the 2007-2008 Global Financial Crisis. It’s enough to make even the most optimistic among us nervous.

A recent JPMorgan Chase survey revealed that most businesses are expecting a recession in 2023 due to continued pricing pressures and economic headwinds.

And if that wasn’t enough, oil prices have surged, with Brent crude oil trading close to $85 a barrel after jumping almost 6%. Economists warn that higher oil prices could make it harder to bring down the cost of living.

The Federal Reserve is increasing interest rates in the most aggressive fashion since the early 1980s as it races to bring down inflation. That’s not exactly reassuring either, as it could impact borrowing costs and increase the likelihood of a recession.

But it’s not just the domestic factors that are causing concern.

The ongoing war effort in Ukraine, financed in part by dollar flows from the US, has the potential to contribute to global financial instability. It’s a good time to consider portfolio realignment to prepare for a global economic shock.

And finally, it’s worth noting that it may be a good time to carry out new stress tests to assess possible network effects of the connectedness of local banks to global banks that may be under stress. It’s always better to be prepared, right?

All these indicators point to a possible recession, and it’s important to take proactive steps to mitigate the potential negative impacts on the economy.

We should keep a close eye on these indicators and take appropriate actions to support the economy’s stability.

In closing, it’s not time to panic, but it’s time to be vigilant. The signs are there, and we should prepare accordingly.

 

By Samuel Sanya

New Age Publishers

DFI Community Member