Updated Feb 15, 2024 - Economy

Recession reality hits major economies

Animated illustration of a downward trending market trend line that plateaus and then stops, at the edge of the line is the Earth, teetering on the edge.

Illustration: Aïda Amer/Axios

Japan and the U.K. each saw their economies shrink for two consecutive quarters, meeting the technical definition of a recession, according to data out Thursday. Meanwhile, in Europe, officials said they expect weaker economic growth across the bloc.

Why it matters: This year may see more global economic turmoil than last as nations struggle to rebound from slowdowns that are worse than previously known. The effects of these slowdowns — together with one in China — could ripple around the rest of the world in unknown ways.

Where it stands: Europe and the U.K. are feeling the sting from the worldwide inflation shock — and from the decades-high interest rates in response that have crimped demand.

  • The U.K. economy contracted 0.3% in the last quarter of 2023 after shrinking by 0.1% in the July-September period.
  • That's a mild recession, but one that shows economic weakness that may continue alongside elevated inflation.

In Europe, officials now expect the eurozone economy will grow just 0.8% this year — down slightly from the 1.2% expected in the fall.

  • "Following subdued growth last year, the EU economy has entered 2024 on a weaker footing than expected," the European Commission wrote in its forecast.

Meanwhile, Japan's economy unexpectedly shrank by an annualized 0.4% in the final quarter of last year after contracting 3.3% in the prior three-month period.

  • That came as consumption dropped last quarter. Japan is facing a welcome rise in inflation after being stuck in a deflationary trap for years. But that means wages are lagging behind price increases — holding back consumer spending.

The bottom line: Even as the U.S. economy remains resilient, other major economies look weaker than initially thought. If it continues, it's a grim combination for countries with still-sticky inflation (or, in Japan's case, inflation that might not be sticky enough).

  • In the U.K., growth might be on the upswing: "I have always viewed the second half of the year as a soft patch. The data is just confirming what I already knew," Catherine Mann, a Bank of England policymaker, told reporters on the sidelines of the National Association for Business Economics' annual conference.
  • Mann pointed to more recent indicators and survey data that are "all looking good."
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