Following up on the examination of what the term spread predicts, here’s the slope coefficients for the term spread, in regressions augmented with short rate, from 1946-2023Q3 (GDP growth 1947-2024Q3).
What Does the Term Spread Predict? IP, GDP, Coincident Index?
It’s commonplace to correlate term spreads with future economic activity measured one way or thSo, while other. Recessions in the US do seem to be predictable on the basis of term spreads; but recessions are a binary variable insofar as the NBER, ECRI, and other institutions define it. What about growth as a continuous variable — be it growth of GDP or industrial production?
Business Cycle Indicators – Mid-November
Industrial and manufacturing production down at consensus rate (-0.3% m/m for both). Core retail sales +0.1% vs. consensus +0.3% m/m. First up, series followed by the NBER’s Business Cycle Dating Committee (personal income and employment are key):
Instantaneous Inflation Rates
PPI and core PPI y/y slightly above consensus:
Instantaneous Core Inflation: Various Measures
Core up, but supercore down:
TIPS Yield, Inflation Breakeven and Dollar Rise
Consistent with expansionary fiscal policy plus tariffs hitting a non-passive Fed reaction function.
Further Dollar Appreciation: Implications
What else would one expect from expectations of expanded budget deficits, higher incipient inflation in the context of a Taylor rule reaction function, when the currency is a safe haven asset?
Trade War and Recession?
Former Senator Toomey (Politico):
“We have a recession coming. That’s what the response would be from a full-blown trade war that [Trump] would precipitate,” Toomey said, referring to the president-elect’s trade proposals. Those include tariffs of up to 20 percent on all imports, tariffs of at least 60 percent on China and more radical positions such as swapping the income tax with tariffs.
Did the Trade Balance Improve with Tariffs? Did Imports Fall? Did Ag Exports Rise?
Answers: No. No. No.
Analyses on the Impacts of Trump’s Proposed Ultimate Solution
Given the results of the election, and Mr. Trump’s statement that deportations will start immediately, there will be a need for facts. I recommend EconoFact’s Immigration page as a start for your analysis.