Implications of Yield Curve Flattening for the UK

In today’s Bloomberg:

In Chinn and Kucko (2015), we find that the 10yr-3mo spread is not particularly informative regarding recessions (as defined by ECRI) or industrial production growth in the UK. It is informative regarding real time GDP, however (which is what we’ll see in the coming months regarding 2019-2020). We didn’t report the 10yr-2yr spread results.

Source: Chinn and Kucko (2015).

 

 

18 thoughts on “Implications of Yield Curve Flattening for the UK

  1. pgl

    “China reported the weakest growth in industrial output since 2002. Germany’s economy shrank as exports slumped, and euro-area production plunged the most in more than three years as the overall expansion cooled. U.S. and U.K. bond markets sent their biggest recession warnings since the global financial crisis.”

    Weakening aggregate demand in not only the US and the UK but also the Euro area and China. I would be alarmed but we all known those Bloomberg economists are socialists working for Elizabeth Warren. MAGA!

    Reply
  2. Willie

    The technical term is fecakatered. We are fecaktered. There will be piles of burning MAGA hats next fall, as the economy hits bottom. This is the fearlessness of pure amateurism on display.

    Reply
    1. pgl

      The Washington Post fact checkers have noted that Trump is lying on average 20 times a day. That story alone contained almost 20 lies. And they were Sarah Palin type lies. Incoherent and pointless. Did someone say something about the 25th Amendment as Trump is clearly insane.

      Reply
  3. Julian Silk

    Dear Folks,

    I will be one of the last holdouts on this, and my life will go on if I am wrong. But a more useful indicator for me is the BEA investment series at Table 1.1.5. My reading of the June 26 figures is at https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey. Fixed investment is still growing, but very slowly, only about 10 billion dollars for nonresidential, and Inventories are still reasonably strong, but are countered by a fall in Equipment spending.
    Meanwhile, Consumption (even Durable Goods) and Government Spending are increasing substantially. So I think the August 29 figures may be more revealing.

    J.

    Reply
  4. Julian Silk

    P.S. I misread the table a little. Equipment spending is increasing at a very slow rate. So you all can decide whether a slow increase is a pause or an indicator of something more severe.

    J.

    Reply
  5. Julian Silk

    Let me add one last thing and that will be far more than enough from me. In 1967, the U.S. endured what people who studied economics in the 1970s learned to call a “growth recession”. Without endorsing the point of view of the authors, an easily accessible document which does discuss this, and the U.S. loss of financial reserves and the steps the various administrations took to stabilize the situation is at https://www.dallasfed.org/-/media/documents/institute/wpapers/2014/0206.pdf. The Bretton Woods fixed-exchange rate system was still in place at the time, and was under increasing strain. Several countries did experience recessions during the year, including Israel and Germany. (On the German recession, see https://www2.gwu.edu/~forcpgm/2016-003.pdf.) Suppose there had been floating exchange rates at the time, instead of the Bretton Woods system. Would there have been the same sort of yield inversion that we are seeing today?

    Julian

    Reply
  6. Moses Herzog

    Is Bernie Sanders like the coolest dude EVER, or what??
    https://www.youtube.com/watch?v=ElBHMAXflac </b

    This is scheduled for tomorrow, and I am sure they will record it in whatever format it's called (mp3 ??) and people can watch it anytime they want.

    I started to follow "Megan Thee Stallion" on reddit before she became big, am I as cool as Bernie?? OK, don't answer that. I'd tell you I was following Cardi B on Twitter before she became big but you wouldn't believe that either.

    Reply
  7. Moses Herzog

    One of the best ways to force action to stop terrorizing hispanic families is by applying financial pain to any private companies assisting in ICE policies:
    https://www.youtube.com/watch?v=S84WY3NRlJg

    If we support and participate in civil protest such as that described in the video, there will be more economic pressure, financial stakeholders’ pressure, and intra-party pressure (Republican party pressure) for the White House to stop this asinine policy on the border. The truth is Americans don’t care if children in ICE detention centers are being starved, receiving emotional torture, and being sexually abused. The people who watch FOX news only care about ONE thing—what affects their immediate world, or their bank account. PERIOD. Let’s call it what it is.

    Reply
  8. pgl

    The 2nd story on CBS This Morning was the inverted yield curve. I guess the socialists at CBS have been reading this blog!

    Reply
  9. pgl

    The Wall Street Journal is blaming Peter Navarro for any impending recession!

    https://www.wsj.com/articles/a-navarro-recession-11565216137

    “A Navarro Recession? Trade and currency mistakes are eroding economic growth.”

    That was a few days ago. Navarro was pissed and went onto Fox Business News to denounce this oped. Well this got the WSJ to double down!

    https://www.wsj.com/articles/the-navarro-recession-ii-11565825029

    The Navarro Recession, II Evidence of a tariff-inspired slowdown spooks the markets.

    Reply
  10. pgl

    My favorite line (or was that lie) from this Navarro interview:

    “NAVARRO: So, look, “The Wall Street Journal” will write what it writes. It doesn’t sounds a lot different from the people’s daily in terms of the news that it puts out. ”

    Ah yes – those Communists on the WSJ editorial board!

    Reply

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