Disappointing economic information from across the world have increased fears that yet another recession is coming.
New evidence surfaced on Thursday that manufacturing and home sales in the US are weakening. Fisher Capital Management saw that there are also signs that banks in the Europe are being burdened more by the region’s weak economy and debt crisis.
The heightened anxiety triggered a great sell-off in shares resulting to lots of investors seeking safety in US Treasury.
Economists are saying that the weakening economy and the volatility in the stock markets have started to feed on themselves. Constant falls in the prices of stocks reduced business and consumer confidence. Companies and individuals usually then invest and spend less, and when they do, stock prices tend to drop even more.
According to Morgan Stanley and Bank of America Merrill Lynch, the risk of another recession is now around one in three.
Many investors are getting worried about the weakening economy of Europe and its leaders’ capability to solve the debt crisis. On Thursday,Fisher Capital Management noticed bank stocks in Europe was quick to drop.
Several sectors of the economy are still steady and strong. For instance, retail sales increased but gas prices have fallen. Job growth has been constant but below what is needed to ease the unemployment rate.
And yet, a consumer survey this month shows confidence in the economy dropped to the lowest level in the last 30 years.
An economist at Bank of America Merrill Lynch, Neil Dutta, said that negative indicators, like the Philadelphia Fed index, reflect sentiment more than actual market activity. Numbers on the actual economy, including the number of people looking for unemployment benefits have not decreased as much.
Dutta added, “We’re not yet prepared to say this is the death knell for the economy, though recession risks are obviously increasing.”
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