Major Economies Face Recession Amid War

Date: 14 June 2022 - 21:34

News ID: ۱۰۳۶۹۴

SINGAPORE (Dispatches) -- Stock markets across Europe and Asia on Tuesday mostly extended recent sharp losses on lingering worries about possible recession for major economies.
Panic has swept through trading floors since data on Friday showed U.S. consumer prices rising at their fastest pace in decades on surging energy and food costs caused by the Ukraine war and supply chain snarls.
The pain has been felt across all assets, with bitcoin threatening to fall below $20,000 for the first time since December 2020, currencies retreating against the dollar, and safe havens including the yen and gold feeling the squeeze.
Investors are bracing for the Federal Reserve’s interest rate decision Wednesday as it struggles to walk a fine line between reining in inflation and trying to keep the economy on track.
“While there is no doubt that inflation is a considerable challenge for the U.S. at this point, slamming on the brakes too hard risks pushing the economy off its track,” said Tai Hui of JP Morgan Asset Management.
Fears that the world’s top economy is heading for a recession sent Wall Street plunging Monday, with the broad-based S&P 500 stocks index sinking into a bear market after dropping more than 20 percent from its recent peak.
Elsewhere, data Tuesday confirmed annual inflation in Germany, Europe’s biggest economy, hit a record 7.9 percent in May.
Huge price increases for energy and food have pushed inflation in Germany to its highest level since the oil crisis more than 50 years ago.
“The main reason for the high inflation is still prices increase for energy products,” said Destatis President Georg Thiel.
The inflation rate is therefore the highest ever recorded in reunified Germany.
According to the data published by the UK’s Office for National Statistics (ONS), Britons are suffering from soaring inflation, which has caused the value of wages to fall at the fastest pace in more than a decade.
“Pay in real terms is falling at its fastest rate in over a decade,” with UK inflation at a 40-year high, said ONS Head of Economic Statistics, Sam Beckett.
The country’s annual inflation rate has soared to nine percent, causing a cost-of-living crisis for millions of Britons.
The unemployment rate across the UK has also risen to 3.8 percent, in comparison to the rate of 3.7 percent in the first quarter of the year, with record-high vacancies seeking for employees, the ONS said in its statement.
“With inflation hurtling towards double digit territory, many workers are increasingly finding that their wages are not stretching wide enough to meet the bumper cost of seemingly everything from food to petrol,” said Myron Jobson, senior

personal finance analyst at Interactive Investor.

Official figures showed British economic output declined for a second month in a row in April, weighed down by runaway consumer prices.

“It is possible that this is the very first signs that the weakening in economic activity since the start of the year is filtering through into a less tight labor market,” Paul Dales, chief UK economist at Capital Economics, said Tuesday.

French cabin crew at Ryanair went on strike on Sunday and Monday demanding better pay and working conditions. A union representative said more than 40 flights had to be cancelled.

Ryanair’s Portuguese cabin staff will go on strike for three days in late June, Portugal’s union of civil aviation personnel SNPVAC said on Tuesday.

The workers, demanding compliance with Portuguese law and better working conditions, will walk out on June 24, 25 and 26, SNPVAC said in a statement.

“This mobilization is not only an opportunity to put the spotlight on multiple attacks on workers’ dignity and to make this reality known but also a moment to show unity and solidarity against dumping”, the union added.

The announcement came a day after Ryanair’s Spanish cabin announced a six-day strike planned for late June and early July.

It came after health workers associated with nine major unions and organizations rallied in the streets to protest against the shortage of staff and resources.

The fuel prices are also rising to record high figures in France caused by a spike in global demand and supply shortages.

With the situation worsening, President Emmanuel Macron points to “yellow vest” protests as the main reason for economic failures of the government.

The anti-government protests of 2018 by low-income voters in florescent yellow safety vests were sparked by anger over rising fuel prices and attempts to tax heavily polluting vehicles. They are making a return to the streets amid the worsening economic situation.

Average diesel prices in France hit an all-time record last week of 1.5583 euros a liter, while petrol was at nearly a 10-year high at 1.6567 euros a liter, slightly below the all-time record reached in April 2012, official data shows.

Meanwhile, rising cost of living across Austria prompted the government to introduce a package of measures, which it said would cost six billion euros this year.

Like many other nations across the European continent, Austria is grappling with inflation that has surged to its highest level in decades.