US banks brace for recession, and other economy stories you need to read this week

The biggest US banks are bracing for a worsening economy next year as inflation threatens consumer demand.

JPMorgan Chase Chief Executive Jamie Dimon told CNBC that consumers and companies are in good shape, but said that may not last much longer as the economy slows down and inflation erodes consumer spending power.

"Those things might very well derail the economy and cause this mild to hard recession that people are worried about," he said.

US consumers have $1.5 trillion in excess savings from pandemic stimulus programs, but it may run out some time in mid-2023, Dimon said. He also said the Federal Reserve may pause interest rate rises for 3-6 months after lifting them to 5%, but that this may "not be sufficient" to curb high inflation.

The US central bank last month raised rates by 75 basis points for the fourth consecutive time, taking them to 3.75-4%, but also signalled hopes to shift to smaller hikes as soon as its next meeting.

Stock markets around the world have fallen this week amid concerns about economic stagnation next year.

European shares have been dragged down by weakness in healthcare and rate-sensitive tech stocks, with investors concerned about a global economic slowdown in the run-up to a raft of major central bank decisions.

The Europe-wide STOXX 600 index fell as optimism around China easing its COVID-19 restrictions was overshadowed by worries around interest rates and the likelihood of recession.

The European Central Bank, US Federal Reserve and Bank of England all meet next week to discuss monetary policy. The Reserve Bank of Australia offered a glimpse of decisions to come after raising rates to a 10-year high and sticking with its projection that more hikes are needed to cool inflation.

"We are again seeing global recession fears rise," Equiti Capital’s Head Macro Economist Stuart Cole told Reuters. "With equities, specifically, there's also a realization that a lot of corporations were far too optimistic and the cost of living crisis is really going to curtail aggregate consumption going forward."

China's exports and imports shrank at their steepest pace in at least two-and-a-half years in November, as weak global and domestic demand, COVID-led production disruptions and a property slump at home piled pressure on the world's second-biggest economy.

The US trade deficit widened sharply in October as slowing global demand and a strong dollar pushed goods exports to a seven-month low. This suggests that trade could be a drag on US economic growth this quarter if the trend persists.

Eurozone GDP grew by slightly more than initially estimated in the third quarter, with household spending and business investment propping up the economy. GDP growth was 0.3% compared with the second quarter and 2.3% year on year, European statistics agency Eurostat says.

Japan faced its biggest fall in real wages in more than seven years in October amid relentless inflation. However, household spending rose for a fifth straight month as easing coronavirus cases prompted more people to shop and eat at restaurants.

The Bank of Canada hiked its benchmark overnight interest rate by 50 basis points to 4.25%, the highest level in almost 15 years. However, it has signalled that the tightening campaign is nearing an end.

Saudi Arabia's non-oil business activity expanded at its fastest rate in seven years in November, supported by a sharp rise in new orders and continued confidence in the growth outlook, a survey showed on Monday.

The UAE's GDP is expected to grow by 6.5% this year and more than 7% next year, the country's economy minister says.

Greece's economy shrank in July-September compared with the second quarter, as declining net exports and public spending offset strong tourism.

The declining share of trade in global GDP is seen as evidence of “slowbalization” – the decline of globalization. But the evolution of trade over GDP looks different for the EU compared with other major trading nations, new research shows.

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