After Tesla CEO Elon Musk last week said the electric carmaker needs to cut staff by around 10 per cent and he has a “super bad feeling” about the economy, the remark sparked a global debate on the likely recession. Some are saying if the world’s largest EV company warns on jobs and the economy, investors should reconsider their forecasts on margins and earnings growth; while others are saying “we’re going to navigate through without a recession”.
What Analysts Are Saying
Morgan Stanley analyst Adam Jonas said in a research note said, “Tesla’s not your average canary in the coal mine. It’s more like a whale in the lithium mine… If the world’s largest EV company warns on jobs and the economy, investors should reconsider their forecasts on margins and top-line growth,” he added.
Moody’s Analytics Chief Economist Mark Zandi says that the US Federal Reserve can pull it off. “I still think we’re going to navigate through without a recession. But, obviously, it’s going to be very, very tight because risks are very high.”
Goldman Sachs Group Senior Chairman Lloyd Blankfein In a tweet has said, “Dial back a bit the negativity on the economic outlook. If I’m managing a big company of course I’m prepping for the worst. But the economy is starting from a strong place, with more jobs than takers, and is adjusting to higher rates. Riskier times, but may yet land softly.”
Megan Greene, global chief economist at the Kroll Institute, said recession concerns are premature. Consumers, the bulwark of the economy, still have a lot of financial firepower built up from earlier in the pandemic, when they were cooped up at home and showered with stimulus checks from the federal government, according to a Bloomberg report.
Deutsche Bank AG Economist Peter Hooper has said the Fed may need to push short-term interest rates as high as 5 per cent to rein in inflation. That would be the highest since 2007 and well above the Fed’s current 0.75 per cent to 1 per cent target range.
US President Joe Biden said let me tell you that while Elon Musk is talking about that (cutting jobs and bleak economy), Ford is increasing their investment overwhelmingly.
“The former Chrysler corporation, Stellantis, they are also making similar investments in electric vehicles… So, you know, lots of luck on his trip to the Moon,” he said.
The 2008-09 Recession
The US experienced an economic downturn from 2007 to 2009 after the bursting of the US housing bubble which turned into the global financial crisis. The effects of the recession were felt throughout the globe. In 2009, the global trade declined 11 per cent, and India’s exports plummeted 16 per cent. In India, rating agencies had revised downward the growth projections.
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