The recession we fear is about to strike

“We expect the economy to fight under the weight of higher interest rates and enter a short period of recession at the end of the year, which will last until the first quarter of 2023.

Martin Beck, EY Item Club’s chief economic adviser, says the “retail sector is already effectively in recession” as the damage spreads as inflation is combined with declining household confidence to cause a “noticeable slowdown” in other consumer industries.

Belenberg Bank’s Callum Pickering says the contraction so far has been largely caused by the end of government spending on Covid schemes such as testing and tracking, but consumer pressure is taking over as the engine of the downturn.

“The UK appears to be in an early stage of recession,” he said, forecasting a decline in GDP from a peak to a low of around 2.5 percent, with the decline continuing until mid-2023.

This is about half the size of the “normal cyclical recession”, as in this case the UK is by no means due to a recession, but instead is a “fundamentally sound economy that has been overwhelmed by various problems, mostly external”.

Nor is it a recession of the type we have become accustomed to over the last decade or something like that – a giant global crisis.

The pandemic has caused the biggest decline in centuries, forcing the nation to stop normal human interactions.

The financial crisis was an international collapse of financial markets with risky lending intensified, which took years to overcome.

This time there are some similarities with the “traditional” recessions caused by overheating the recovery, rising interest rates and a temporary drop in production. But that usually comes at the end of a full multi-year business cycle, with Lawson booming and falling in the late 1980s and early 1990s, not so long after the giant global crisis.

While demand in the United States has risen amid monstrous spending programs, the UK’s recovery has been much slower.

An alternative comparison is the energy price shocks of the 1970s, when OPEC’s oil embargo forced it to raise spending in the West, causing inflation to rise and causing numerous declines.