EconomyFirstFT: Pan-Atlantic recession ‘increasingly likely’, warn economists

FirstFT: Pan-Atlantic recession ‘increasingly likely’, warn economists


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The risks of the US and Europe sliding into recession have risen sharply, economists have warned ahead of the G7 summit that begins on Sunday.

Economists on both sides of the Atlantic told the Financial Times they had become increasingly pessimistic after the Federal Reserve’s jumbo rate rise to counter soaring inflation, and on mounting concerns over Europe’s gas supply in the run-up to winter.

Holger Schmieding, chief economist at Berenberg Bank, said the balance had “tipped” in favour of an economic contraction next year in the US and Europe. “What used to be a rising risk has now turned into the base case.”

Goldman Sachs doubled the risk of the US entering a recession this year from 15 per cent to 30 per cent, with a 48 per cent probability of a recession over a two-year horizon in the wake of the Fed’s first 75 basis point rise since 1994.

Bar chart of Annual % change, by date of forecast showing Berenberg is among the banks that has grown gloomier on the outlook

Thanks for reading FirstFT Americas and have a relaxing weekend. We will be back in your inbox on Monday but first, the rest of the day’s news — Gordon

1. DoJ officials resisted Trump’s pressure to overturn election Donald Trump’s attempt to overturn the 2020 US presidential election was thwarted at the last minute in part because of the resistance of some of his top legal officials, the Congressional committee investigating last year’s attack on the US Capitol has been told.

2. US banks pass stress test The Federal Reserve yesterday gave passing grades to all 33 of the country’s biggest banks in annual stress tests, which gauged each lender’s ability to weather a series of doomsday hypothetical scenarios.

3. Ken Griffin’s Citadel ditches Chicago for Miami The billionaire hedge fund manager is moving his firm Citadel to Miami from Chicago, telling staff in a memo his company’s new home “embodies the American dream”. Griffin has previously threatened to leave Chicago over rising crime rates.

4. FDA bans Juul products from US market US regulators have banned Juul Labs from selling its e-cigarette products in the country, citing its role in fuelling an epidemic of teen vaping. Juul, which is 35 per cent owned by tobacco group Altria, said it would explore all its options to stay on shelves, including appealing against the decision.

5. World’s biggest bacteria discovered Thiomargarita magnifica, a gigantic bacteria 50 times larger than any bacterial species previously known to science, has been discovered in a Caribbean mangrove swamp. “It would be like a human encountering another human as tall as Mount Everest,” said the lead author of a paper describing the new bacterium.

The days ahead

Economic data Economists expect the University of Michigan’s consumer sentiment index to report a record-low reading of 50.2 in June, matching the preliminary reading reported earlier this month. Sales of newly built homes in the US are expected to slow to an annualised pace of 588,000 units in May. Sales of previously owned homes are forecast to have dropped for the fourth straight month in May due to high house prices and soaring mortgage rates.

Company earnings Used car retailer CarMax and cruise line operator Carnival will report earnings before the bell. CarMax is expected to report $1.52 in adjusted earnings a share on revenues of $9.1bn. Carnival is expected to report an adjusted loss of $1.10 a share on $2.77bn of revenues.

International summits European leaders meet for a second day in Brussels a day after they agreed to make Ukraine and Moldova candidates to join the bloc. On Sunday, the leaders of the seven leading advanced economies convene for three days of talks in the Bavarian Alps, with discussions likely to be dominated by how to keep up the pressure on Russia while fighting rocketing inflation in the energy and food sectors.

What else we’re reading

Abortion in America — the road to rolling back Roe vs Wade As the Supreme Court prepares to roll back the landmark 1973 ruling, Lyz Lenz documents the rise of the Christian right and how it reached this historic moment.

Crypto enthusiasts are betting the house on creative destruction Instead of basking in the sun, crypto enthusiasts have recently been confronting winter. But I would not be ready to bet that private digital money will actually die — mutation seems more likely, argues Gillian Tett.

Pringles’ secret recipe When Kellogg announced plans to break itself into three separate companies this week, it did not place its biggest bet on Corn Flakes, instead it emphasised the prospects of savoury snacks, led by its inimitable brand of processed crisps. John Gapper asks, how are Pringles still growing half a century later?

The world that decides what porn you see The de facto regulator of the adult industry isn’t a government, international convention or the business itself. It is Mastercard and Visa. The payments companies wield this power uncomfortably, relying on a cadre of satraps to make occasionally bizarre distinctions, such as the conditions of acceptable vampire sex.

Your phone’s notification settings and the meaning of life It is absurd how surprising it is that one feels much calmer after turning off phone notifications. But it is a warning to us all. It is easy to sleepwalk into a state of chronic stress and distraction without considering that things could be different, writes Tim Harford.

Cinema

Baz Luhrmann’s mad, maximalist glitterbomb Elvis biopic and a mesmerising documentary about qat are just two of this week’s cinema releases reviewed by film critic Danny Leigh.

Austin Butler stars as Elvis alongside Tom Hanks who exudes childcatcher vibes as his manager Colonel Tom Parker

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