World’s Top Economies Face Contraction Amid Uncertainties

Expert Fears Global Recession, More Humanitarian Disasters

Gas prices over $7.00 a gallon displayed at a Chevron gas station in Menlo Park, Calif., on May 25, 2022. Justin Sullivan/Getty Images

COVID-19 restrictions, global supply chain disruptions, and the impact of the Russia-Ukraine war on energy, food, and metals prices have resulted in the shrinkage of the world’s top two economies—the United States and China.

U.S. inflation remains at a 40-year high, with April’s consumer price index jumping 8.3 percent from 12 months earlier, according to the Labor Department. Compared to the 8.5 percent jump in March, the annual rate of inflation in April remains at a level unseen since the 1980s.

Chair of the Federal Reserve, Jerome Powell, told Wall Street Journal on May 17 that he will keep raising the federal interest rates until he sees clear evidence of prices falling back. He added that “there could be some pain involved to restoring price stability,” such as slowed economic growth and increased unemployment rates.

Jerome Powell departs after taking the oath of office for his second term as Chair of the Board of Governors of the Federal Reserve System at the Federal Reserve Building in Washington, D.C., on May 23, 2022. Olivier Douliery/AFP via Getty Images

According to The Conference Board, a U.S.-based non-profit source for statistics and trends, its Leading Economic Index (LEI) for the United States “decreased by 0.3 percent in April to 119.2 (2016=100), following a 0.1 percent increase in March,” declining for a second consecutive month in 2022.

“Overall, the U.S. LEI was essentially flat in recent months, which is in line with a moderate growth outlook in the near term. A range of downside risks—including inflation, rising interest rates, supply chain disruptions, and pandemic-related shutdowns, particularly in China,” the report stated, adding that the recent decline in U.S. LEI was largely due to weak consumer expectations.

LEI is an index published monthly by The Conference Board. It is used to predict the direction of global economic movements in future months, as Investopedia defined.

Likewise, but more severe than the United States, The Conference Board’s LEI for China “decreased by 1.0 percent in April to 169.7 (2016=100), following a 0.4 percent decline in March,” also declined for two consecutive months and pointed to increased risks to its economic outlook.

The report cited COVID-19 restrictions, global supply chain disruptions, and the impact of the war in Ukraine on energy, food, and metals prices as some of the causes for China’s declined economic outlook.

For nearly two months, since April 5, Shanghai—a city of about 26 million people best known as a financial and trade hub of East Asia for more than a century—has been in total lockdown.

A resident looks out from her window during a COVID-19 lockdown in the Jing'an district of Shanghai on May 25, 2022. Hector Retamal/AFP via Getty Images

A recent telephone survey conducted by East China Normal University (ECNU) showed that 89 percent of business operators surveyed had lost confidence in their businesses or were ready to shut down their businesses. The team led by Guan Hao, a doctorate at ECNU, contacted 2,603 small and medium-sized enterprises for the survey, with 38.15 percent of the calls answered.

Monthly data released by China’s National Bureau of Statistics also showed the country’s grim economic outlook as productivity declined in many sectors, including industrial production, service, and market sales.

In addition, China’s urban unemployment rate was 6.1 percent in April, 0.3 percentage points higher than in March. Notably, the unemployment rate in those aged 16 to 24 reached 18.2 percent. Major cities, which usually have more stringent zero-COVID restrictions, showed a higher unemployment rate—the urban unemployment rate in 31 major cities was 6.7 percent, according to surveyed data released by the statistic bureau on May 16.

Chairman of China’s National Institution for Finance & Development, Li Yang, disclosed in a public speech last December that the unemployment rate was more than 20 percent in those aged 20 to 24 with college-equivalent education or above. He added that in 2022, the number of college graduates would exceed 10 million for the first time, worsening the unemployment problem among college-educated youth.

“Economic behaviors, such as investment and consumption, are primarily based on the confidence in the future economy,” Tao Rui, a political and economic commentator, told The Epoch Times on May 24. “The most alarming issue about the global economy today is the uncertainty about the future. And that unpredictability in some of the world’s largest economies—[the United States and China]—may lead to a global financial crisis.”

“Nowadays, politicians manipulate and strengthen their power through the crisis and uncertainties, or even create emergencies to empower themselves,” Tao said, adding that the power grabs by the political elites may further worsen the matter.

“If a financial crisis were to break out, its damage would be no less than the 2008 financial crisis … and could plunge every major economy into recession accompanied with widespread humanitarian disasters, similar to what we saw in the Russia-Ukraine war and the Shanghai lockdown.”

People line up for nucleic acid tests to detect COVID-19 at a makeshift testing site in Chaoyang District on April 25, 2022, in Beijing, China. Kevin Frayer/Getty Images

Ellen Wan contributed to this report.