There is increasing concern that the United Kingdom and other countries of the world may be heading for a recession.
Why is everyone talking about a recession?
Markets reacted anxiously Wednesday, mainly because of the "reverse yield curve" – where it had become essentially cheaper for the US and UK governments to borrow money for 10 years instead of two.
As a rule, it should be the opposite and economists consider it to be one of the leading warnings on the global economic dashboard. The last time this happened was in 2007, just before the financial crisis.
In the United States, a reverse yield curve preceded each US recession since the 1950s.
So, we definitely have one?
Not enough. Some commentators suggest that there has been an overreaction and that stock market falls around the world have more to do with the ongoing financial crisis in the city.
But that does not look good. Stock markets tend to be one of the last indicators of major problems and they are booming. The FTSE 100 lost more than 200 points in two days. Germany, France and the United States are all in trouble.
The German economy is also struggling and recorded a 0.1% drop in GDP in the second quarter. Two falls in a row mean technically a recession.
The UK has reported a 0.2% decline in GDP over the same period, but Brexit storage could help the country avoid it.
What other warning signs are there?
Brexit has already scared off the currency markets as the pound is trading at historic lows against the dollar and the euro. Economic data on retail sales, construction and manufacturing are all in negative territory. However, the job market and wages are holding up pretty well.
Real estate prices are a particular concern, especially in London, which is often considered the engine of the UK real estate market.
The Office for National Statistics (ONS) said this week that housing prices in London tended to fall for longer than they were in 2008 and 2009.
Should I worry about events abroad?
Yes. If we want to have a recession, it will be mainly driven by global events such as the ongoing trade war between the United States and China. President Donald Trump has constantly used his Twitter account to escalate tensions and tariff threats weigh heavily.
China has its own difficulties and its own economic data suggests a slowdown, which is difficult when the country buys as much from the rest of the world.
In fact, the collapse of the FTSE 100 has more to do with international events, as most of the biggest companies in the sector trade products such as chemicals, oil and gas, all things China likes to buy.
Why should I worry?
The markets are controlled by humans and they tend to follow the crowd. One of the main concerns is that if enough people believe we are headed for a recession, they may create one by panic, which will cause a vicious cycle.
If you have a pension, it is more than likely related to the value of the stock market and the value of the pound can continue to fall, making everything dependent on oil – like any truck carrying loads of bananas in our supermarkets . – costing more.
Finally, if previous recessions are legion, there could be a drop in real estate prices.
What happened to the housing market after the previous slowdown?
The fall in prices caused concern that people were trapped in negative equity, which meant that they had borrowed more than their property was worth. Housing prices in northeastern England have not yet surpassed their peaks before the economic downturn – which shows just how much these effects lasted.
Concerns were also expressed about some people who had taken out interest-only mortgages – who had no realistic plan to repay their debt once the term of the mortgage had expired. Some hoped that house prices would continue to rise. However, most banks have abandoned interest-only loans.
What about my job?
During the last downturn, the UK labor market remained strong relative to other recessions in the UK, which also resulted in high inflation. But with a much more flexible workforce and declining immigration, there is every reason to believe that the labor market can withstand even a recession.
Earlier this week, the Office for National Statistics said earnings growth reached its highest level in 11 years, with weekly gains reaching 3.9% in the three months to June.
However, regardless of the recession, businesses tend to reduce their expenses to wait for the end of the storm, which could reduce their expansion. A recession also tends to expose companies in trouble, resulting in the bankruptcy of more and more businesses.