Nice to see you again after the summer break. To talk to you about what? But what has been agitating our experts for a few weeks, namely a winter that we risk going candlelight due to the rise in the price of gas and more generally of energy. And as if that were not enough, the same experts are predicting the worst economic events for us. In particular a recession in Europe after the United States will have already entered recession this summer.
Nice to see you again after the summer break. To talk to you about what? But what has been agitating our experts for a few weeks, namely a winter that we risk going candlelight due to the rise in the price of gas and more generally of energy. And as if that were not enough, the same experts are predicting the worst economic events for us. In particular a recession in Europe after the United States will have already entered recession this summer. It is quite surprising to speak of a recession because for the time being, the reality in Europe does not yet reflect these predicted tragedies. I have made a few phone calls to bankers and all of them tell me that their credit portfolio is doing well and that there are no abnormal defects to be noted. Even if of course, they add, “the bosses are worried about the start of the school year” because they read the press, like you and me, which is in anxiety mode. The other paradox of this recession is that the unemployment rate is at its lowest in the United States. It is also down in Europe, and even here in Belgium. Labor shortages affect a lot of sectors, which, admit it, is not characteristic of a classic recession. As for the fable that only companies with pricing power – like Apple – are able to pass on higher prices to consumers, analysts have found that to be a fiction: the results of companies in the first half show that almost all companies were able to pass on the rise in inflation to consumers! If the “mistigri of inflation” could be passed on to consumers, it is because we generally had a delay in consumption and a surplus of savings linked to Covid-19, a period during which we – consumers – do not we couldn’t go to a restaurant or travel. Of course, companies will not be able to pass on rising costs to consumers forever, but in the meantime they have done so. For some observers, the recession is a good thing, contrary to what one might think. Amazing? No, because a temporary recession lasting a few months is better than inflation that lasts and causes mortal social damage. Because who says recession, says drop in demand. So that’s going to allow global supply chains to get back to normal and put an end to those bottlenecks. In short, all of this mechanism will result in lower prices. Moreover, if the price of oil is falling at the moment, it is because the market is anticipating a drop in global demand. And if there is a drop in inflation, there will also be a drop in interest rates. In the end, yes, it’s paradoxical, but for rates to go down, they have to go up first. It’s a way to make the economy land softly. And if you are wondering why the stock market has recovered, it is because investors are in this mode of reasoning. In summary, the economy is slowing down, household savings which served as a shock absorber are melting like snow in the sun because part of it has already been consumed. As for the job shortages that we see in the United States and in Europe, the bet of certain analysts is that they will partly – and I mean partly – be absorbed because the people who had left the labor market jobs for various reasons, will have to come back and agree to respond to the millions of unfilled vacancies. In short, what I shared with you is not a Care Bears vision of the economy, but less apocalyptic than what we find in most media. Rest assured, such thesis is not in the minority, it is just inaudible because it does not gain ratings!