Risk of Global Recession in 2020 Revitalized by Coronavirus Outbreak; US Yield Curve Inversion Deepens as Business Activity Contracts
- Recession risk is back on the rise and largely attributable to expected economic impact from the coronavirus outbreak
- The US Dollar[1] has crumbled since notching a three-year high as preliminary Markit PMI data for February showed US business activity contracted to a 76-month low
- An inverted US Treasury yield curve suggests downside risks faced by the economy still loom and could prompt the Fed to cut rates again
Odds that the US economy will soon slip into a recession are likely back on the rise. This follows our prior US Recession Watch[2] that highlighted a downshift in recession probabilities and the US-China trade war[3] late last year.
Now, as the coronavirus hits confidence[4] and sends a shockwave across the global supply chain, economic data is starting to deteriorate rapidly. Chances of a global recession in 2020 have been rekindled as a result.
US Economy Starts to Crack as Services Sector Contracts Amid Coronavirus Contagion
Considering how China is the second largest economy in the world, it is expected that the hit directly to Chinese GDP will drag total trade and business activity lower across the globe in a similar fashion.
This theme was just highlighted in a study published by the World Trade Organization on how global merchandise trade growth is likely to weaken further into 2020.
Meanwhile, American businesses have already started to sound the alarm bell. Apple Inc (AAPL) – the biggest US company by market cap – announced it sees its revenue at risk[5] and not expected to hit its revenue guidance for the quarter owing to the coronavirus
