Global Recession Risk Rapidly Growing, With A Major Economy On The Brink, Wall Street Economist Says

The U.S. may officially hit the common economic definition of a recession this week when the Bureau of Economic Analysis reports its preliminary estimate of second-quarter U.S. GDP growth on Friday. But while Americans consider the implications of an inflation-fueled recession, Bank of America economist Ethan Harris says the entire world is drifting closer to a global recession.

Recession Risk: Harris recently said there is a "rapidly-growing risk of a global recession." He defines a global recession as a period in which annual global GDP growth drops below 2%. Bank of America is currently forecasting just 3% global GDP growth, but even that number could be at risk if elevated inflation persists.

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Harris said Japan and the U.S. are the only two major global economies he projects slipping into recessions, but China is currently emerging from a recession and Europe is currently on the brink of tipping into one. In addition, global emerging markets are suffering to various degrees depending on their proximity to the Ukraine war.

Harris said the global economy is currently worse off than the sum of its parts.

"Putting it all together, the risks of an outright global recession are quite high," he said.

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Harris said he's particularly concerned about the aggressive rate hikes by several central banks around the world, including the Federal Reserve. In addition, he is worried about feedback effects across regions, such as the impact of a U.S. recession on global consumer and investor confidence.

Benzinga's Take: The SPDR S&P 500 ETF Trust SPY is up 1.8% in the past month, suggesting investors don't seem too concerned about a recession at the moment. The stock market is forward-looking, suggesting investors are more optimistic about the economic outlook in the second half of the year and beyond.