“Britain crashing out of the European Union without a deal could trigger a deep and damaging recession with worse consequences for the UK economy than the 2008 financial crisis, the Bank of England has warned.
“Raising the stakes as Theresa May battles to win support in parliament for her Brexit deal, the central bank said that failure to reach a deal with Brussels – with no transition period to a new trading relationship – could spark an immediate economic crash.
“GDP could fall by as much as 8% next year, exceeding the depth of the recession that followed the financial crisis in one of the worst-ever peacetime capitulations for the economy…
“According to the Bank’s analysis, house prices could fall by 30% and the unemployment rate could increase from its current level of 4.1% to about 7.5%, while interest rates could be forced to rise as inflation increased to 6.5%.”
“Households are still sitting on historically large piles of debt, the Bank of England has warned.
“Although people’s debt is lower than it was during the financial crisis a decade ago, falling from 144 per cent of incomes to 125 per cent today, the central bank said that consumers could stop spending abruptly if they came under more financial strain. This, in turn, would amplify an economic downturn.”
“U.K. banks are looking to prepare business clients ahead of Brexit in anticipation for tightened access to financing, Reuters reported on Tuesday. Reports said U.K.-based financial institutions (FIs) are growing increasingly concerned that Brexit will lead to an increase in bad loans to corporate borrowers, with possible defaults resulting from delays in cross-border trade shipments or payments. Sterling value volatility could also heighten defaults, according to reports.”
“For Ireland, it has been estimated that a hard-Brexit would cost between 4.5 and 7 per cent of GDP, but over a prolonged period of years.
“What is new about the Bank of England estimate is how quickly it suggests that the economic cost could be paid in a worst-case scenario under which the UK crashes out next March with no withdrawal agreement signed…”
“The Swiss economy unexpectedly shrank in the third quarter, blighted by a drop in exports and weak domestic demand.
“No economists surveyed by Bloomberg had forecast the contraction of 0.2 percent — the median prediction was for an expansion of 0.4 percent.”
“A new study shows that Italy’s long economic crisis is having an impact on nutritional health in the country synonymous with the Mediterranean diet…
“The survey, funded by the Barilla Foundation, said a likely factor in the unexpectedly low ranking was the increase in the percentage of people living in poverty since the 2008-9 financial crisis.”
“Asia has been hit by a slew of weak gross domestic product reports for the third quarter, with global growth also sputtering at a time when rising interest rates and a U.S-China trade war threaten more pain. China’s weaker-than-expected performance kicked off the gloom. Japan then got hit by natural disasters, while growth throughout Southeast Asia faltered as well as in South Korea, Hong Kong and Taiwan. India’s economy also slowed…”
“China is likely to see sales of excavators, loaders and dump trucks — proxies for the country’s infrastructure and building sectors — fall 7-8 percent next year… The expected downturn in demand underscores a major challenge facing Beijing even as it looks to fast-track infrastructure projects to support economic growth, which has cooled to its slowest pace since the global financial crisis and is facing mounting pressure from U.S. tariffs.”
“China’s financing units for local governments, already grappling with bloated debts, now face an even bigger predicament —
“…a build-up of credit guarantees that leave them vulnerable to surging defaults.”
“Home prices in Sydney and Melbourne have dragged the Australian housing market into its biggest slump since the start of the global financial crisis. Preliminary figures from CoreLogic’s Hedonic Home Value Index showed national property prices fell 0.9 per cent over the first 28 days of November. This would push total falls for the year to an estimated 5.6 per cent – the largest national drop in prices since December 2008.”
“Sales of new U.S. houses dropped in October to the weakest pace since March 2016 as rising borrowing costs and elevated prices keep buyers out of the market. Single-family home sales fell 8.9 percent from the previous month, to a 544,000 annualized pace, according to government data Wednesday. That was below all estimates in Bloomberg’s survey of economists…”
“Venezuela has the world’s highest inflation, surging to 1,000,000 percent this year. Economists are drawing comparisons to Germany in 1923 and Zimbabwe in the late 2000s.
“The deepening economic and social crisis has forced 3 million Venezuelans out of the country since 2015. Exact figures are unknown, but that number has been rising steadily in recent months.”
“There’s a cloud hovering over the G-20 meeting of global leaders, which starts in Buenos Aires on Friday. The world economy is slowing, threatening an end to the long recovery from the financial crisis… These concerns raise an important question among aficionados of a multilateral world: If the economy entered a new downturn, would national leaders – in the age of U.S. President Donald Trump – be able to orchestrate a global response?”
“In a cautionary note from the Institute of international Finance, Reuters explains that non-financial corporate debt has hit a new record high as a decade of businesses borrowing their way out of recession continues. Debt among non-financial corporations across the globe rose to a record high of $75 trillion in the second quarter, driven mostly by China and the United States, the Institute of International Finance said in a report.”