FirstFT: Pan-Atlantic recession “increasingly likely”, economists warn

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The risks of the US and Europe slipping into recession have increased dramatically, economists warn ahead of the G7 summit starting on Sunday.

Economists on both sides of the Atlantic told the Financial Times that they had become increasingly pessimistic after the Federal Reserve’s jumbo rate hiked to counter the surge in inflation and as concerns over security increased this winter. European gas supplies while Russia cuts exports.

Holger Schmieding, chief economist at Berenberg Bank, said the balance was “pinned” in favor of an economic contraction next year in the US and Europe. “What used to be an increasing risk has now turned into the base case.”

Goldman Sachs has doubled the risk of the US going into recession this year from 15% to 30%, with a 48% chance of a recession over a two-year horizon on the back of the first 75bp hike. Fed since 1994.

Bar chart of annual% change, by forecast date showing Berenberg is among the banks that have gotten darker on the outlook

How worried are you about a recession? How come? Tell me what you think firstft@ft.com. Thanks for reading FirstFT Europe / Africa. Here’s the rest of the news of the day: Jennifer

1. Ukraine and Moldova obtain EU candidate status European leaders agreed yesterday at a summit to make candidate countries join the bloc, a historic move taken in record time in response to Vladimir Putin’s invasion of Ukraine.

  • Related reading: The EU senior diplomat insisted that the blockade has no intention of blocking the legal transport of Russian goods to Kaliningrad via Lithuania. The head of Germany’s RWE, meanwhile, has warned that EU solidarity will be put to the test this winter if Russian gas supplies are cut off.

  • The FT view: Russia is stepping up the pressure of natural gas on Europe, but the time has come for EU countries to accelerate the transition to renewable energy.

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2. Discovered the largest bacterium in the world Magnificent Tio Margherita, a gigantic bacterium 50 times larger than any bacterial species previously known to science, was discovered in a mangrove swamp in the Caribbean. “It would be as if a human being met another human as tall as Everest,” said the lead author of an article describing the new bacterium.

3. US banks pass the stress test The Federal Reserve yesterday rated all 33 of the country’s largest banks in its annual stress tests, which assessed each lender’s ability to withstand a severe economic downturn.

4. The UK estimates a 5% wage increase in the public sector Faced with the escalation of the cost of living crisis and widespread strikes, ministers believe it is increasingly unsustainable to maintain public sector wage agreements, particularly for nurses and teachers, in the 2-3% range they were aimed at, according to the government officials.

Line chart of real average weekly earnings in UK (total pay, including bonuses, 2010 = 100) showing public sector pay remains well below 2010 levels in real terms

5. The head of Deutsche Bank waives 1.4% of the bonus Christian Sewing and his top team are giving up a small portion of their 2021 bonuses, in a rare move intended to show that management is taking the blame for using unapproved messaging apps at Germany’s largest bank.

The days to come

UK by-election results The Conservatives are poised to lose two seats in the by-election, Wakefield, Tiverton and Honiton, in what could provoke a new backlash against Boris Johnson.

Economic indicators The German Ifo Business Confidence Monthly Index is out, as the UK has May retail sales and Bank of England Chief Economist Huw Pill gave a lecture on “Inflation and Debt: Challenges for Monetary Policy after Covid-19 “. Spain publishes first quarter gross domestic product data.

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Transport for London Funding Tomorrow is the deadline for the UK to extend funding for the capital’s metro and bus network operator.

G7 Summit The leaders of seven of the world’s advanced economies summon for three days in the Bavarian Alps starting Sunday, with expected discussions focused on how to proceed with sanctions against Russia. (Reuters)

What else are we reading

Fintechs face the showdown A wave of fintech firms has driven successive funding rounds towards ever higher valuations over the past five years. But as central banks raise rates to fight inflation, the industry is grappling with a world where expansion can no longer be fueled by cheap money and business models must be proven by profits.

Pringles’ secret recipe When Kellogg announced plans to split into three separate companies this week, he didn’t place his biggest bet on Corn Flakes, instead emphasizing the prospects for savory snacks, driven by his inimitable brand of processed chips. John Gapper asks, how do the Pringles still grow half a century later?

Pringles tube

John Gapper: Other snacks, from cereal bars to cookies, are selling fast as people go from eating three meals a day to regular grazing, but Pringles excels © Dreamstime

The world that decides what porn you see The de facto regulator of the adult industry is not a government, an international convention or the company itself. It is Mastercard and Visa. Paying companies exercise this uncomfortably power, relying on a group 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’s absurd how amazing it is that you feel so much calmer after turning off your phone’s notifications. But it is a warning to us all. It’s easy to get into a state of chronic stress and distraction without considering that things might be different, writes Tim Harford.

Revlon has become a meme stock Revlon stock rose from about $ 1 per share to $ 8, less than a week after the company filed for bankruptcy protection. But don’t expect a resurgence of its fortunes reminiscent of the Hertz car rental company, writes Sujeet Indap.

Books

Are you looking for a summer read? Here are Gideon Rachman’s Best Mid-Year Politics Books, by Barbara F. Walter How civil wars begin: and how to stop them to that of Henry Kissinger Leadership: Six World Strategy Studies.

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