On the Brink of Global Recession

Thursday, November 1, 2012
By Paul Martin


The Global Economy is on the brink of a recession with 58% of 29 OECD countries experiencing business cycle contractions. The chart below shows OECD defined global contractions (grey shaded areas) together with the percentage of 29 OECD member countries experiencing slowdowns. It is evident that whenever 50% or more of countries enter contraction (red dotted line) that the odds of global recession are very high.

The blue lines show NBER recessions for the U.S and we see that whilst every U.S recession occurred during an OECD-defined global recession, the converse is not always true. So whilst global recession is certainly an alarm bell for the U.S economy, it is just that – a shot across the bows and not a direct hit. This is therefore not a reason to hit any panic buttons but a warning to monitor the US recession models ever more closely for any signs of weakness. The U.S seems to be plodding along despite woes outside her borders. Certainly, her exports and foreign earnings are taking a hit but she is by no means down and out and for now at least, not in recession.

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