Recession threat may be real – but it’s NOT Brexit’s fault, says ROSS CLARK

GDP figures published by the Office for National Statistics last week showed that between April and June, the UK economy experienced its first quarter of negative growth since 2012. That was followed sharply by similar news from Germany. Italy has already had a recession, in the second half of last year, and appears to be heading for another, while in China, economic growth has slowed to its lowest level in years. Meanwhile, investors spotted an arcane phenomenon known as an "inverted yield curve". This is when the yield – or interest – on a 10-year US Treasury bond falls below that of a two-year bond.

Without going into the details of why it happens, previous such events have proved to be uncannily accurate predictors of a forthcoming recession.

It occurred shortly before the recessions of 2008/09 and 1990/91, and the US recession of 2001 - although the latter never affected Britain.

A recession is defined as two quarters of negative growth. Given that we have just had one quarter in which the economy shrank - by 0.2 per cent - you could say we are already halfway to recession.

When bad economic news starts to roll in all, it is natural to panic.

Moreover, at a time when we are heading towards Brexit on October 31, many people will be tempted to make political gain out of a recession.

If we do officially dip into recession, arch-Remainers will lose no time in blaming it on Britain's departure from the EU and saying "we told you so" - even though their past forecasts of economic Armageddon have proved to be wide of the mark.

A month before the 2016 referendum, the Treasury famously claimed that a Leave vote would lead to a contraction in the economy of between three and-a-half per cent and six per cent within two years, accompanied by a rise in unemployment of between 500,000 and 800,000.

In the event, the economy carried on growing and employment is now at a record high.

The current downward trend is a global affair. Britain's small economic decline is mirrored in Germany, and growth is slowing around the world.

The threat of a no-deal Brexit will, of course, have some bearing on business confidence but globally, a far bigger influence is the trade war between the US and China.

When the world's two largest economies are locked in conflict, there is inevitably going to be a knock-on effect throughout the world.

But even without a trade war, it would be surprising if the world didn't suffer a recession over the next few years.

Despite Gordon Brown's best efforts to abolish booms and busts, recessions seem to be part of a natural cycle which repeats at least once a decade.

Businesses and consumers go through bullish phases when they are prepared to spend and borrow – and then they go into phases when they draw in their horns.

Quite what drives this cycle is a mystery. It is just something we have to live with.

That said, it is all too easy for us to make a recession worse than it needs to be simply by panicking.

If we all stop spending money because we fear there is bad economic news ahead, a recession becomes a self-fulfilling prophecy.

There are reasons to hope that if we do have a recession, it will be a relatively short-lived one.

Recent economic growth in developed countries has been subdued so economic contraction is also likely to be mild.

But wise investors know not to panic.

Staying invested in the stock market is, in the longterm, a better way to make money than attempting to rush in and out of the market.

No one, in any case, should take a recession for granted.

Separate figures last week for the Purchasing Managers' Index showed that activity in our services sector is picking up again.

Officially, we won't know if we are in recession until the ONS publishes its economic growth figures for the third quarter in November.

It will coincide with Britain's departure from the EU, which will make it politically explosive.

Yet in reality, we would merely be joining other countries in a worldwide recession that in some ways is overdue.

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