The chances of a recession in the US surged suddenly to a degree that even surprised economists at UBS.
The likelihood of a sharp contraction in the economy jumped to 73% from just 24% in December. This is the biggest one-month jump in the risk of a recession since 1989.
"Our view is that tariffs will cause more damage than expectations, and real economic data is now consistent and fully in line with the prerequisites for recession."
In the past, there have been only five internal cyclical delays over the last 50 years, which has led to a strong reaction from the markets.
"The graph shows the economic delays themselves, even if they did not follow a full recession, so this is a good indicator of economic stagnation." - say UBS.
Previous economic downturns have led to serious impacts on assets such as oil and its strong depreciation in 2015, which has stifled investments in the US energy sector.
UBS points out that the war as a major contributor to the rise in the chances of seeing a weakening in the labor market in the major US manufacturing sectors.
Most analyzes revolve around a sector of the economy known as durable goods - made up of electrical appliances, jewelery, pets, toys, sports equipment. It tends to be a direct indicator of the economic development and shows quite clearly where the consumption and financial health of households are moving.
The sharp deterioration in household consumer spending on durable goods raises the risks of recession.
Source: Business Insider
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