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Europe 'Likely to Go Into Recession': Strategist

Europe is on the verge of recession and the US is already in a growth recession – an expression used by economists to show that growth is so slow that more jobs are lost than added, a strategist told CNBC Monday.

"All the indicators that mattered showed a contraction, yes some of them might have contracted more slowly but they contracted.

Europe is going to go into recession overall and the US is in a growth recession at least with the risk still on the downside," Nick Parsons, head of strategy at National Australia Bank, told CNBC.

"Six (the US, Japan, Germany, France, UK and Italy) out of seven of the biggest economies on the planet will show 0 percent growth for this third quarter and with Europe likely to go into recession we need to have a much longer-term horizon, otherwise we'd be well advised to step aside for the moment," Parsons added.

Global gross domestic product is around $62 trillion, with the six economies making up $31 trillion of this total.

The latest ISM Manufacturing report for the US for August, which detailed falling production, orders and exports but rising inventories, is a great lead indicator that a recession is imminent, he said.

The risks to Europe come from Germany, he argued, suggesting that to date Germany has been the glue in the euro zone holding the euro together but if doubts creep in about the country and German growth, Europe would suffer.

"If we get any doubts about the willingness and ability of Germans themselves to pay for sovereign bailouts in the periphery then I think we are in real trouble," Parsons said.

"The 40 million adult Germans' views are the ones that most matter on this, I sense that they are very unlikely to vote in favor of more bailout money, that is the most difficult hurdle for financial markets over the next month – take away Germany you don't have a euro in any meaningful sense," he added.

Contact Europe: Economy

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