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Recession risk still haunts global economy but downturn stabilising – ICIS

Global economic activity remains in the doldrums and there is still the risk of a recession, but the pace of the downturn seems to be stabilising, the ICIS Leading Business Barometer (LBB) for October showed.

There are great regional variations though, with Europe’s LLB weak data putting the recession closer – a slowdown increasingly supported by official data – while the US and China appear in better form.

Overall, the global LBB stood flat in September, compared with August, but was down 0.9% compared with September 2022. The index peaked in March 2022.

Europe, reeling from the shock of the energy crisis after Russia invaded Ukraine, is being the hardest hit region with the LBB accumulating two years of declines.

In the past few months, the rate of decline accelerated, adding to the recessive fears; Europe’s LBB fell 0.5% from August, and 3.5% from September 2022.

China’s recovery post-pandemic remains slower than anticipated and, following a short-lived, post-lifting of restrictions boom, the economy went back to a slow gear, with the LBB painting a mixed picture in the past few months.

The data continues adding concerns about how sustainable the country’s recovery will be. China’s LBB stood flat in September month on month and year on year.

The US’ LBB posted a slight decline month on month but stood nearly 4% lower than in September 2022. In October, production-related indicators among materials sensitive to cyclical fluctuations were mixed.

Raw material, other input prices and selling prices edged down, as did equity prices, while inventory and other broader leading economic measures were negative but less so. The US’ LBB trends in the past year are consistent with recessionary conditions.

Kevin Swift, senior economist for global chemicals at ICIS, said the global economy is still in large part reeling from the pandemic as major economies go through the late cycle stage of an uneven expansion from the pandemic-induced recession.

“There remains evidence of expanding service activity in many developed economies, with a tightening of monetary policies and higher oil prices weighing on the outlook. China’s economy appears to have stabilised amid policy easing, while Europe’s economy has lost momentum amid a manufacturing downturn,” said Swift.

“The US ‘rolling’ recession scenario continues to play out amid strong Q3 growth. Global trade remains soft, and we expect global trade volumes to expand by just 0.3% this year, down from 5.1% in 2022 and 10.9% in 2021. The global ICIS Petrochemical Index (IPEX) has been weak in all regions through October.”

Swift added that global trade is expected to gain momentum in 2024, with a 2.9% expansion, and more so in 2025 with an increase of 3.8% in 2025.

The ICIS LBB looks at nearly 20 indicators relating to the production of materials and other industries sensitive to cyclical fluctuations; raw material and input prices; selling prices; hours worked; relative equity prices; industry sales-to-inventories; and several broader economic leading economic measures.
Source: ICIS by Jonathan Lopez, https://www.icis.com/explore/resources/news/2023/10/31/10939406/recession-risk-still-haunts-global-economy-but-downturn-stabilising-icis/

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