Are We Headed For A Double-Dip Recession?

Are We Headed For A Double-Dip Recession?


The Global Purchasing Managers Index is a good indicator of the level of economic activity.

As the chart below shows, the global PMI plunged for the services and manufacturing sector due to the novel coronavirus pandemic.

Global PMI

With the help of expansionary policies coupled with resumption of economic activity after the lock-down, the global PMI is currently back above 50.

A reading below 50 indicates recession and a reading above 50 indicates economic expansion. So the good news is that the global economy is crawling back to normalcy.

However, can growth sustain?

It seems very likely that European countries will go for another lock-down as coronavirus cases surge. If this happens, another recession is likely in the coming quarters.

One hope is that consumer spending increases during the holiday season can boost consumption driven growth. I however doubt if that will be enough.

From a policy perspective, it's likely that money printing will continue. The Federal Reserve has already committed to keep interest rates near-zero levels through 2023.

Easy money will keep flowing and speculation across asset classes will continue. At the same time, money printing would imply depreciation of fiat currencies. Gold, silver and cryptocurrencies will remain in focus.

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faisalhk786
faisalhk786

I am a financial analyst with interest in global financial markets and macro economy. I write for various publications providing short-term and long-term investment ideas among different asset classes.


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