Long the biggest shopping day of the year, Black Friday is not what it used to be. In the brave new world of e-commerce, it now seems like every day is Black Friday. There is no formal kick-off to the holiday shopping season.
But dark clouds are all too evident on this day after America’s 2022 Thanksgiving. Notwithstanding some moderation from June’s peak inflation rate of 9.1 % — the CPI was tracking 7.7% in October — consumers’ real purchasing power is still under extraordinary pressure from sharply elevated prices. And with the personal saving rate at 3.1% on October well below pre-pandemic readings of 8.8% in 2019, there is little to backstop hard-pressed families. And all this, of course, is before the lagged impacts of the Fed’s monetary tightening hit with a vengeance and push up the still low unemployment rate.
The dark clouds of Black Friday are especially evident in Europe, which is now slipping into outright recession in the face of the Russian energy shock and the impacts of central bank tightening. Germany and the UK, Europe’s twin economic engines, are leading the way. The special tragedy of Ukraine is almost beyond description — the human and infrastructure carnage dwarf the sharp downturn in the Ukrainian business cycle and its concomitant impacts on world grain supply and food prices.
Nor is China playing its traditional role as a silver lining to otherwise dark global clouds. Unlike the aftermath of the Global Financial Crisis when Chinese growth held firm in the 7% to 8% zone and prevented the world from slipping back into a post-GFC recession, China is on a sub-4% trajectory in 2022-23, according to the latest forecasts of the International Monetary Fund. And the risks to that forecast remain very much on the downside, as Xi Jinping’s patently impractical “zero-Covid” policy has led to ever-escalating chaos and disruption in China’s social fabric, to say nothing of its weakened economy. The lack of a China cushion could well be a decisive blow for an already weakened global economy.
For all of those reasons and more, I continue to expect that 2023 will be a year of global recession. While that’s not exactly the most uplifting message on this Black Friday, I can still find a silver lining in those looming dark clouds: The World Cup is the world’s greatest distraction at a time of global turmoil. My new book is about to be published in four days — finally. And I just survived my first bout of Covid.
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