The world’s major economies have been hit hard by governments’ “let’s rip” policies against COVID-19, rising inflation and high interest rates imposed by central banks aimed at crushing workers’ wage demands. In the aftermath of the recent turmoil, the trend toward recession is intensifying. .
The US, the world’s largest economy, has experienced a second straight quarter of negative growth and shows signs of further contraction ahead as rising prices of basic commodities hurt consumer spending. .
The impact of COVID is reflected in employment and labor market data. The U.S. workforce is 600,000 fewer than he was when the pandemic began in 2020. wall street journal A recent article states, “Adjusting for population growth is a few million smaller.” The number of workers has fallen by 400,000 since March.
The labor force participation rate (the percentage of the population aged 16 and over who is working or looking for work) continues to decline. He dropped from 62.4% in March to 62.1% in July. Before the pandemic, it was 63.4%.
The hit to the US economy is also reflected in economic output data. Second-quarter gross domestic product fell 2% below his January 2020 forecast, according to Congressional Budget Office projections. Employment was also 2% below forecast, with about 3 million jobs lost.
At the same time, inflation is currently hovering between 8-9% and essential food items are up more than 13% over the past year. While wages have risen, they have lagged inflation, with the average worker’s wages falling 3.6% in real terms. This means that consumer spending, which accounts for up to 70% of US GDP, is under downward pressure.
China, the world’s second-largest economy, has experienced a significant slowdown in economic growth. The economy grew just 0.4% in the second quarter, narrowly avoiding a full contraction, and the outlook looks worse.
China’s premier Li Keqiang on Tuesday met with local officials from six of China’s main provinces, which account for 40% of the country’s economy, to bolster growth after weaker-than-expected July data on consumption and industrial production. requested that the measures be taken.
China’s deteriorating economic outlook is the result of a global pandemic, which the Chinese government, in contrast to all other governments, is fighting to control. It is also due to the sharp decline in the real estate market.
The central bank’s decision to cut medium-term interest rates to stimulate the economy came as Premier Li appealed to local authorities to do more and promised the central government would take steps to boost growth. It was later.
Given the flow-on effect, the real estate sector, which accounts for more than a quarter of the Chinese economy, continues to deteriorate. The “floor area of houses” for which construction started between April and June this year has decreased by nearly half compared to last year.
Municipal finances have been severely impacted, with revenues from land sales so far this year down 31% compared to the first half of last year.
Consumer spending is up slightly in real terms compared to the first half of last year and remains 10% below its pre-pandemic trend.
Germany, the world’s fourth largest economy, is on the brink of recession. Retail sales fell at the fastest annual rate since records began being collected in 1994, an 8.8% drop from a year earlier, according to data released earlier this week. This follows data indicating that economic growth in Germany stagnated in the second quarter.
The German economy has been hit by the effects of NATO’s proxy war against Russia underway in Ukraine, with gas prices skyrocketing and supplies slashed, with ramifications across the eurozone economy.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: financial times Manufacturers such as Germany “are facing an increasingly deep recession, increasing the risk of a regional recession,” he said.
Last week, Clemens Fuest, head of German economic think tank Ifo, said the concern was the “widespread” nature of the economic weakness. In previous recessions, when services suffered, the industry recovered and vice versa, he said. “But now we see weakness across the board.”
The UK, the world’s fifth largest economy, continues to be hit by deteriorating economic conditions. Yesterday it was reported that Britain’s official July inflation rate, itself an understatement of the impact on working-class households, reached 10%. The Bank of England expects it to reach 13% by the end of the year, with more to come.
The Bank of England expects the UK economy to move into recession, contracting by at least 2% from peak to trough.
The contraction is likely to be even greater now that the central bank is trying to escalate its tightening policy. The aim is to push the economy into recession and curb rising demand for wages across Britain’s working class.
The central bank is now expected to raise the base rate by 50 basis points multiple times this year. Real wages continue to fall, falling 4.1%, the most since records began in 2001, according to the latest data.
Falling wages lead to cuts in consumer spending, accelerating the move toward recession.
Japan, the world’s third largest economy, is the only bright spot in this deteriorating situation across the world’s major economies.
Its economy grew at an annualized rate of 2.2% in the second quarter, boosted by higher consumer spending as the government lifted COVID restrictions. However, the uptick could be temporary. GDP rose just 0.1% in the first quarter, and the International Monetary Fund, in its latest economic update for July, forecast Japan’s economic growth in 2022 to be just 1.7%, down from his 2.4% in April. revised downwards to
This week, Bloomberg published an important report on the decline in orders for computer chips. This is sending “a shudder to North Asian high-tech exporters who have historically served as pioneers in the international economy.”
South Korean semiconductor companies Samsung and SK Hynix have signaled plans to cut investments, while the world’s largest producer, Taiwanese semiconductor manufacturer, is heading in the same direction, it reported.
South Korea’s technology exports fell in July for the first time in two years, and “June semiconductor inventories piled up at the fastest pace in more than six years.”
Bloomberg said exports from South Korea, the world’s 12th largest economy, “have long been correlated with global trade, and export declines face headwinds such as geopolitical risks and rising borrowing costs. It means adding signs of trouble to the global economy.”
Significant downward shifts in major economies are not the result of successive shifts in the business cycle followed by upturns.
This is one aspect of the general collapse of the world’s capitalist economies, including the ongoing COVID crisis, record levels of private and government debt, and the economic impact of climate change. Highest inflation in 40 years fueled by barge movements in Germany and increased war with Russia and belligerence against China.
And it is the result of the class struggle that the world’s financial capital is waging against the international working class. The ruling class, which has distributed trillions of dollars to businesses and financial markets in the form of direct government currency and ultra-low central bank funding, has paid the working class an amount equivalent to social benefits. I am determined to let it go. counter-revolution.