Chapter 9 August 18th Financial News
[Quick Facts]
1. Sanctions against Russia may cause a collapse in the European economy.
2. The U.S. is likely headed for a mild recession in end-2023 or early 2024.
3. Initial jobless claims indicate a resilient labor market.
[News Details]
Sanctions against Russia may cause a collapse in the European economy
Eurostat released data on August 17 local time showing that the number of bankruptcy declarations of EU businesses in the second quarter of 2023 grew for the sixth consecutive quarter, up 8.4% year-on-year, reaching the highest level since 2015 when data collection began.
Inflation and rising energy and transportation costs are factors that make it impossible for many businesses to survive. Behind this is precisely the energy crisis triggered by Europe following the footsteps of the United States in sanctions against Russia, which led to hyperinflation driven by rising energy prices. In order to curb high inflation, the European Central Bank had to raise interest rates, which in turn inhibited economic growth. Europe may be in great danger of approaching recession. 2023 and 2024 will be relatively bad years for the economy.
The U.S. is likely headed for a mild recession in end-2023 or early 2024
The Conference Board Leading Economic Index for the U.S. declined for the 16th consecutive month in July, suggesting that the economic outlook remains highly uncertain. Weak new orders, high-interest rates, declining consumer optimism about the outlook for the business environment, and fewer hours worked in the manufacturing sector pushed the leading index down 0.4% MoM in July. This suggests that economic activity is likely to decelerate and slip into a mild contraction in the months ahead. The Conference Board currently forecasts a brief but mild recession in the U.S. economy between the fourth quarter of 2023 and the first quarter of 2024.
Initial jobless claims indicate a resilient labor market
U.S. initial jobless claims rose at a slower pace last week, suggesting that the resilience of the economy is making employers reluctant to lay off workers. The U.S. labor market continues to be strong, despite the impact of rising borrowing costs on various industries. While some employers are beginning to scale back hiring, many are hesitant to fire workers as they struggled to attract and retain talent during the pandemic.
[Focus of the Day]
UTC+8 14:00 U.K. Retail Sales MoM (Jul)
UTC+8 16:00 European Central Bank Chief Economist Philip Lane speaks
