In a project with Laurent Ferrara, we have been examining the properties of financial indicators as predictors of (NBER defined) recessions. In addition to the term spread, we have considered Financial Conditions Indices (Arrigoni-Bobasu-Venditti, Goldman Sachs), the foreign term spread (a la Ahmed-Chinn) and the BIS debt service ratio (suggested by Borio-Drehmann-Xia). Slides from presentation in June here.
Category Archives: recession
The Recession of 2022H1 – Rec Vehicles, but No Spam
Reader Steven Kopits, in response to a posting of alternative indicators, writes:
Kopitsian (and Other) Recession Indicators
I’m not of the mind that a recession is going to be avoided, despite increasing confidence this will be the outcome. However, it is hard to find indicators the recession is here, even when looking at measures Steve Kopits (of 2022H1 recession fame) has mentioned.
Term Spread Watch – Is This Time Different?
A reporter for Marketplace (hear piece at 10 minutes in) asked me today whether this time was different, especially in light of all the positive coincident indicators (Q3 GDPNow has been at 5.6% for a couple weeks; Fed staff has upgraded q4/q4 growth, Goldman Sachs pegs recession probability at 15%). I was (I hope properly) circumspect.
Monthly GDP and Coincident Index
The Brave-Butters-Kelley monthly GDP for June is out. Here’re growth rates of this series compared against the SPGMI (formerly IHS/Markit) monthly GDP, and the Philadelphia Fed’s coincident index, which should track GDP.
Business Cycle Indicators, as of 9/1
With the employment release, and the monthly GDP from SPGMI, we have the following picture of key macro indicators.
Business Cycle Indicators for July
With personal income, consumption, and manufacturing and trade industry sales released, no downturn yet. If consensus holds, the momentum continues into August. Here are some key indicators followed by the NBER BCDC, along with monthly GDP and GDPNow.
The 2022H1 Recession Call in Hindsight, the 2023H2 Call in Context
Back at the beginning of this year, Mr. Steven Kopits asserted that the Philadelphia Fed’s early preliminary benchmark supported a recession in 2022H1, to wit:
Q3 GDPNow at 5.9% (SAAR)
To see how dramatically this bean counting approach deviates from consensus, consider this graph:
No GDP Downturn Forecasted: SPF
In contrast to the July WSJ survey, the just-released Survey of Professional Forecasters mean forecast shows no negative GDP growth.