I'm Katie Martin, the markets editor here at the Financial Times in London, sitting with our economics commentator Martin Sand.

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Today we're discussing whether or not the world is heading for a recession will be trying to answer your questions, so please leave them in the comments section.

Some people have already left some great comments and thank you for those.

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So are we heading for a recession?

This is the question that's become so important because we've seen that some signals indicate we could be on the verge of an economic meltdown.

The U.

S yield curve inverted late last month.

Global PM eyes showing that cos of contracting and getting nervous Indian, Chinese and European economies are all slowing down.

So, Martin, what do you think I suspect?

If we knew the answer to this question would be sitting on a yacht somewhere rather than in this studio.

This is old joke about economists and how economists have predicted nine out of the last five recessions.

What?

It just means that people rarely get this right.

Yeah, alright, it's People predict one and one doesn't happen or they don't predict, and then it does happen.

So you know, with that as a benchmark, we're gonna least try.

So I don't know what there's going to be a recession.

I don't think it's certainly not inevitable, but it could happen.

What we do know is that we have.

You could think of it as recessions in sort of segments of the world economy.

So trade is hurting because of the trade war, so trade and some parts of the global trade flows are contracting.

So you could sort of talk over trade, recession, most goods that are traded, our manufacturing goods right.

The goods are traded more than service is, and there is a manufacturing recession in the sense, said manufacturing.

Production is contracting in Europe in the US now.

So for one part of the economy, there is a contraction.

And overall, of course, there's a slowdown.

The world economy and most big economies have been scrolling down for the last year, even Maur and the question is, s load and go all the way to zero and below.

That's the big question.

What do you think?

Well, I mean, like you, I don't have a crystal ball.

I don't know the definitive answer, but it's certainly, ah, question that people in markets are asking increasingly often, not least because we've just been in this bull run for such a long time.

Ever since the crisis of 2008 markets have been pretty benign.

They've bean do stop by lots of central bank support, and now we're at the point where people are sort of looking at their watches and thinking we sort of do a bit of a pullback.

So people start casting around and looking for reasons to worry.

Now, clearly, a very big reason to worry is trade.

As you say, the number one thing that comes up in discussions with economists and investors around the city is about what's going on between the U.

S.

And China.

Now, do you?

What's your sense?

Do you think that this is a genuine reason for caution?

Or, I mean, it's clearly reason for caution is a reason for panic.

Or do you think that both sides will back away before they really go All in?

There are lots of people who benefit from trade.

Yeah, there's Ah, there were very few people who are calling for an outright trade war before basically Trump, look President Trump launch one.

He has his political motives.

He also has a lifelong belief that the US is being ripped off by early was Japan.

Now it's German.

It's also s O.

Now it's China.

It's also Germany, and it could well move to Europe at some point his target.

But you also see his sort of pattern of making a lot of chaos and then striking a deal that sometimes looks very much like what he had before this.

What happened in the trade negotiations with Canada and Mexico, you know, speculatively.

My bet is that when it's politically convenient for him, he will, you know, declare victory.

There will be some changes to the trading relationship between us and China.

Buddy will be back to something more or less similar to what we had before, But I think there's an outside chance outside chance that there are by now enough protectionist forces in the U.

S.

That really want to kind of re bring back these global supply chains that have developed over the last 30 35 years.

The U.

S is a big enough economy that he can kind of go it alone.

Ill will be less rich as a result, but it can do it.

It's a huge economy, but that's going to be a big political fight that isn't just about Trump, but also inside the Democratic Party.

There are different opinions about trade with China, so it's It's an open question.

I think the probability is that at some point when it's politically convenient, it will quiet down and we'll get back to know quite the status quo ante, but something that looks pretty much similar to what we used to.

And then we can just stop talking about the whole thing.

You can find something else.

Something you've already brought up is manufacturing Andi.

This is obviously first in the line of fire when trade wars really get fired up on dhe.

We've seen that.

I think we've got some chance to demonstrate this, that we should be able to get on the screen for you.

That this is really showing the strain.

Now there's a large part of the world that is showing that manufacturers air getting incredibly nervous.

One of the things that you hear a lot about in this situation is PM eyes purchasing managers indices.

Basically, there are companies that go around calling up companies and saying, Hi, how's business?

How's it going?

What are your orders like, What?

What's your hiring schedule Like, what it would do your inventories like, how you feeling about the next few months and that produces these indices called P M Eyes on.

They're a really good indicator of how worried people are.

And so, you know, you have to kind of know what you're doing when you're looking at these payments, what they are telling you and what they're not.

But when you get a number that's under 50 that is their way of saying That's the indices way of saying.

Yet we're now looking at a contraction, and there are lots of spots around the world.

You look a Germany is obviously the big example in Europe.

But there are lots of places around the world where company executives said, say yes, we worried this this is hurting.

I mean, how much of a feed through is that, too?

The bigger picture for you?

Well, that's exactly the question, because manufacturing.

Making things.

It's still important, but it's actually not a very big part.

Off which economy?

Yeah, maybe 20% depending on the economy.

Most people don't work in factories.

Most people don't make stuff they work in.

Service is retail.

Service is, you know, shops, cafes, restaurants.

Well, there could be this sort of service is that make the economy go round?

But you don't see them on the high Street on the main street if you're watching in the U.

S.

Accounting legal service is all sorts of expert work.

And, you know, you're the university sector research.

All of these are service's, and that makes up roughly 80% of the economy.

And so until now, this slowdown that you've just described an actual recession in the manufacturing sector in industry, the big question has been Is this going to feed through any service is, and most places that hasn't happened yet.

It's kind of, you know, it's don't you know it?

Sze uncertain.

It's not really booming anywhere, but service's seem to be holding their own.

In most places, there are sort of small signs in Germany.

Service is of such a calm down a bit in the UK quite a bit.

Still doing a lot better than industry everywhere.

We don't know what we do know.

Something about is how we could happen, right?

And some of it is because factories, the manufacturing part of the economy, our customers off surfaces.

So you know, if your factory doesn't sell its goods, then it's not going to buy.

Service is from service businesses around that will hurt.

Or it could be a confidence thing.

And everyone sees trade war factories closing.

Well, we'd better watch out and not spend money and that effect since presently Leslie call me.

That's how it would happen.

Yeah, we've got a question here from Robert Dukes.

Do central bankers and governments take preemptive action to avoid recessions?

If the curve inverts now by the curve, averted what he's talking about here?

Yes, exactly.

So one of the big reasons why this question around whether there is a recession, that hand is really shot up.

The agenda is basically that the bond markets are flashing red.

They are saying you need to be worried about what's going to happen next.

So the super safe stuff in markets government bonds of absolutely rocketed pretty much.

Anyone with an interest in markets will be able to tell you that yields and now yet negative on $16 trillion worth of debt around the world.

That means well, we always have to remember it.

When the price goes up, the deal goes down very low.

Yields means a lot of people want to hold.

It basically means that people are so desperate for safety that they're prepared to take a guaranteed loss on what they bind to be able to just have some safekeeping of their funds on.

We've also seen this famous inversion of the yield curve.

Now, generally speaking, this is an excellent indicator of what's going to happen in the global economy Next, but basically speaking, yes, it should cost governments Maur to borrow for the long term than it should for the short term.

So your yield curve should generally point higher, and what it's doing now is pointing low, which means that there's basically just massive demand for all types of debt, and this is crushing yields for all sorts of different maturities.

On this sort of inversion, this funny shaped curb, as we call it, is a real cause for concern.

What's what's your sense of whether it is a slam dunk in the culture of a recession?

Because it's a huge debate?

Yeah, yeah, exactly.

And that's why places like the F.

T.

We talk about recession fear so much because of these signals.

So, yeah, in the markets now, people are willing to accept lower interest rates to lend for very not 2030 years, 10 2030 years, then forthree months.

Neil Kirby is negativity right and sloping.

Damn right.

And the market.

The Yield Cove is a much better predicted than economists.

I made that joke beginning the economy's sort of mis predict.

I mean, you know better than me, but I think the yield curve in the U.

S.

At least has been a pretty good.

Pretty much every recession has been preceded by one an inversion of your curb, and they can't have been many cases of the yield curve inverting without a recession form.

It looks like a slam dunk, but actually I don't think it is, and authors of dangerous phrase.

But this time is different.

This time is different in that in the last 10 years, central banks have been buying a lot of long maturity bonds, so they're in there buying their driving the prices.

After running the yields down, which is intended right, central banks go out there buying this stuff to make it cheaper for companies to borrow.

This is a feature not about It's a feature, not a bug.

But it also means that you can't really take the difference between short term rates and long term rates as a pure market signal.

It's a result of policy.

The Bank of Japan explicitly targets both the short term and the long term rates, so it's just a function of policy.

The short term rate is what is.

The short term is minus.

One of the long term is minus point.

One of the long term is zero, so it's just built in as a result of policy.

So unless you're saying that this policy will lead to a recession, I don't think it has the same predictive power that it used to have when it was just the result off judgments in the market.

And I'm going back to this question that we received the will.

Central central banks try to get ahead of research.

That's precisely what's happening here.

We've had not so much hints from central bankers as kind of waving great big signs in the air from central bankers, saying inflation is just not coming up, like with the Arctic would.

As a result of all the policy that we've been pouring into the system for the last decade, we have inflation mandates, which means that we have to target a certain level of inflation.

Generally speaking, around 2% Andi so way have to do what our mandate tells us to do, which is just keep on a zing.

And with interest rates basically zero or even lower in a lot of places, that means buying more bonds.

And so the market is getting ahead of those extra bond purchases.

That's kind of what markets are.

For now.

One of the phrases that keeps coming up in my conversations with people in markets at the moment is over their skis.

There is this idea that the bond markets have just a little bit too far forward.

They've priced in enormous bond part purchases, in particular from the European Central Bank, But that's kind of trickle through throughout the system and There is a bit of a sense now that unless central banks really deliver, deliver some really heavy handed extra bond purchases, maybe the bond market has won a little bit, too, it far ahead of itself.

Would you be surprised to see a bit of ah pull back from the markets?

If the central bankers don't do quite what we're expecting to?