As I wrote yesterday, “tomorrow is another day”.
Figure 1: UK Economic Policy Uncertainty (blue), and centered 7 day moving average (red). ECRI defined recession dates shaded gray. Source: policyuncertainty.com, ECRI and author’s calculations.
UK Measured Economic Policy Uncertainty in Context
In some ways, policy uncertainty — at least as measured using text — is not as bad as I would’ve thought. Here’s the Baker-Bloom-Davis index:
Yield Curve Inversions in the UK
Recession coming? Or is it already here? Here’s a picture of the UK yield curve as of today, a month ago and 6 months ago:
Reserve Currency Status Is No Vaccination against Recklessness – UK Edition
…although it helps.
I never thought an advanced economy government could pursue stupider policies than that implemented under the Trump administration. Consider me corrected on this point – case in point, the United Kingdom in 2022.
Q3 Growth vs. Benchmark Revisions
Lackluster growth is nowcasted for Q3 by Atlanta Fed (0.3% SAAR), somewhat faster by Goldman Sachs (1.2%). It’s important to remember that the impact on the implied level of GDP might be dwarfed by the annual benchmark revision. And for the first time, the annual benchmark revision will come September 29th, rather than the end of July.
Messages from the Market
One term spread steepens sharply; only one spread has actually inverted. The five year inflation breakeven is falling. And risk is rising.
CFNAI in August
Doesn’t look like a recession in that month, nor in previous.
Weekly Economic Activity in the UK, and Two Self-Inflicted Wounds
So far, the UK economy is plugging along, according to the OECD Weekly Tracker (through 9/17). But (understatement of the year), challenges have arisen.
Tracking the Euro Area at High Frequency
There aren’t many measures of euro area wide economic activity at higher than monthly frequency, to my knowledge. One series is the Woloszko (OECD) Weekly Tracker, based upon big data and machine learning, discussed here. VoxEU post here. This measure shows deceleration in the week through 9/17.
Guest Contribution: “The Dollar Dazzles Once More”
Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. An earlier version appeared at Project Syndicate.