Economists have torn up their forecasts from as recently as early autumn after the combination of a vicious credit crisis and a – subsequently reversed – commodity price boom destroyed business and consumer confidence.
Households in rich countries, either too scared to spend for fear of losing their jobs or unable to secure credit, have sent early winter shivers down retailers’ spines; car sales have fallen through the floor. Companies, for their part, will also not risk much new investment in such a poor climate.
A recession in almost all advanced countries is now guaranteed, the first time since the second world war that the world’s rich economies have sunk simultaneously. Yesterday the Organisation for Economic Co-operation and Development, their own club, became the latest body to forecast a contraction in the world’s largest economies next year.
Among the rich countries, Britain appears most vulnerable, with the twin problems of having the most highly indebted consumers and a large financial and business services sector. The universal nature of the commodities boom and credit crisis will also lay the rest of Europe low, but the country that is likely to suffer the longest is the US, where the subprime mortgage bust led to the subsequent mess.
The dynamic emerging markets of Brazil, India and China are still growing, but at slower rates. Nerves are jangling at the notion that, far from pulling the rich world out of a recession, they too will be sucked in.
