Double Deep World Recession

What is the probability of a double deep recession?

Well, if we want to answer this question, we need to specify what are the key elements for this to happen. First of all we need to start analyzing the demand side. We can see in it a week recovery because we have a high unemployment rates in the main world countries. We can appreciate a positive trend in savings rate and a decline in the consumption. United States was the main world consumer, and the recovery of the world demand will depend of it. However, the consumer demand is still week in there.

Second, the supply side is recovering quickly. The inventories of companies are recovering swiftly. The production sometimes improves before of the demand in order to match it. In my view, China is now the main world supplier, and is having a big recovery of the production. The risk here is to have an important supply and an small demand. The overproduction is a likely scenary.

The excess of supply I think will determine if there is a probability of double deep. It could generate a sudden stop in Chinese production and negative circle around it (fall of investment and consumption). In addition, it will depend of the new type of growth model of United States.