What does the risk of technical recession that the ECB warns about mean?
After noting the drop in growth in the euro zone compared to Eurostat forecasts, the German representative of the European Central Bank, Isabel Schnabel, stated in an interview with Reuters that these slowdown indicators open the door for the euro zone economy to between technical recession. Contrary to what is considered an economic recession, the nuance of a technical recession implies different conditions. A technical recession is considered when the economy of a country -or in this case, of the euro zone- chains two consecutive quarters with negative values in its gross domestic product in year-on-year terms. This is the case of the United States, which registered a drop in its quarterly economic activity of 0.4% between January and March 2022, followed by a second quarter that was also negative, in this case of 0.2% compared to the set of the three previous months. The main difference between an economic recession and a technical one lies in the timing of the recession. To continue with the example of the United States, if its economy managed to recover its production in the last two quarters of the year and close 2022 positively, we would speak of a technical recession in the first two quarters of the year. In the event that the downward trend continues until the end of 2022, with the GDP figures in negative, then we would find ourselves with a scenario of economic recession itself. Other factors that determine the distinction are employment and consumption indicators. Both in the United States and in Europe, the expansionary policies and the increase in spending in recent years have caused unemployment rates to fall and consumption to remain stable -although it shows signs of contraction for the third quarter due to the lack of savings due to inflation, it is still healthy. One cannot then speak of an economic recession as long as the main macroeconomic indicators are stable, something that seems unlikely taking into account the forecasts, constantly revised downwards, by economic organizations and financial and state institutions. Related News standard No Energy and the shopping basket drive a new inflation record in the eurozone, up to 8.9% Teresa Sánchez Vicente In the case of Spain, the harmonized inflation rate in July stood at 10 .7%, compared to 10% in June In the case of the United States, they have a specific body to declare a recession, the National Bureau of Economic Research, which defines a recession as "a significant decrease in economic activity that extends to the whole of the country and lasts more than a few months”, something that does not happen in Europe.
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