JP Morgan and Goldman Sachs think a European recession is on the horizon

According to American investment banks JP Morgan and Goldman Sachs, Europe is close to recession.

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Europe threatened by recession

According to two major US investment banks, JP Morgan and Goldman Sachs, rising commodity prices, strong international instability and inflationary pressures could soon bring a new recession across the eurozone. 

Goldman Sachs economists said in a recent report:

"Risks are skewed towards a sharper recession in the event of an even more severe disruption to gas flows or a US recession, according to our forecast."

Recession in the US

Based on the data that came out on Thursday, the recession would be almost in full swing, given that the economy contracted for the second quarter in a row.

At the same time Powell, the chairman Fed, a Yellen, the Treasury secretary, tend to rule out a US recession, or at least, as Yellen said, believe it is inevitable.

“Well, I expect the economy to slow down. It is growing at a very fast pace as the labor market has recovered and reached full employment. It is natural that we now expect a transition to stable growth. But I don't think a recession is inevitable.”

Fed: response to inflation level

At the last meeting, the Fed raised rates again by 0.75 % to combat rising inflation, which has never been this high in 40 years.

According to many analysts, these increases will only have recessionary effects on an economy that is already showing signs of slowing.

Even more complicated, at least according to what the experts say Goldman Sachs and JP Morgan, seems to be the situation in the Eurozone. 

According to both investment banks, growth will slow by 0.5 % in the third quarter and 0.5 % in the fourth quarter. The same decline should also occur in the first quarter of next year, effectively confirming that a recession has occurred.

JP Morgan forecast

Slightly more cautious are JP Morgan's estimates, which forecast eurozone GDP growth of 0.5 % this quarter, followed by a contraction of 0.5 % in the fourth quarter of this year and the first quarter of next year.

Goldman Sachs economists believe that:

"Looking across countries, we have Germany and Italy in a clear recession in the second half, while Spain and France continue to grow."

The ECB is likely to raise interest rates by 0.25 % instead of the planned 0.5 % precisely because of these early signs of an economic slowdown in the Eurozone.

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