There is a growing sense of worry in the marketplace, as investors, speculators, and economists alike worry over the prospect of a coming recession. Although the past several years has been largely bullish for the economy, it appears there might be some data to suggest that this is changing. Recently, China released its February export figures, which saw the nation’s exports drop around 20 percent, the most in three years.
As reported by Reuters before the weekend, Chinese export figures have fallen for the third consecutive month, causing many to worry that a further slowdown in the economy is looming. Although seasonal factors could be influencing these figures, the decline is shockingly substantial for the world’s largest exporter, where a potential downturn could have ripple effects in the U.S. and elsewhere. Chinese stocks dropped 4 percent during the trading day when the news came out.
“Seasonal distortions around the Chinese New Year holiday has added noise to the export data in the past two months, and in our view explain most of the surprise (relative to consensus),” said Goldman Sachs analysts, who’s estimates predicted that the 20 percent drop in exports would be a worst-case scenario which has now manifested.
Much of this weakening in Chinese trade figures come from the increasingly intense negotiations between Beijing and Washington. On Wednesday, the U.S. reported that it reached an all-time high trade deficit of around $621 billion. Another economic metric released in February was the monthly job figures, which saw the U.S. adding 20,000 new jobs in February, the lowest job growth seen in one and a half years.
This was far below the expected 180,000 jobs expected but considering the past few months of strong job figures, one poor month isn’t worrying economists too much. But combining these poor Chinese trade figures alongside these dropping U.S. figures have led some to expect a bearish downturn in the years to come. Federal Reserve Chairman Jerome Powell had little to say about these figures, saying that the metrics surrounding the labor market “looks as favorable as they have in many decades” and that there is “nothing in the outlook demanding an immediate policy response.”
Some of Wall Street’s most respected investors have shared their thoughts on the prospect of a nearing recession, with may expecting such a thing to be inevitable. “This will be limping along; three steps down, two steps back. It’s not a typical experience,” said legendary investor Jeremy Grantham according to CNBC, who started the world’s first index fund. “I was really hoping there would be a magnificent bubble ending to this, as there had been to the three great recent experiences. They were all classic. They ended with euphoria and a rapidly accelerating stock market. They’re easy; you know they’ll be followed by an abject decline. This one, I was hoping that would happen. It doesn’t look like it will and, therefore, you’re going to have a decline of a different nature.”
While there are still some positive indicators that could suggest a reversal, especially since these sorts of recession fears have periodically appeared over the years (such as in 2016 before it went away), an increasing number of experts consider that some sort of a “soft recession” is likely.