Where is the US economy going-Powell-FED President-proiezionidiborsa.it
The definition of recession is certainly not the same for all who use it. They range from the concept of GDP contraction for at least 2 consecutive quarters, to the composite conception of a body such as the NBER. Some indicators can help us better understand the situation. Where is the US economy going?
In the USA the conception of recession, at least that one subject to analysis by some institutes, such as the NBER, does not correspond to the classic definition of two consecutive quarters of contraction.
The situation, apart from hypotheses of a predictive nature, as regards the US economy, is not as simple to define as some would like.
The NBER itself, which has defined the possibility of projecting recessionary phases, however does not declare it to exist until after it has manifested itself. With a variable delay between six and nine months.
The FED has taken a restrictive monetary policy stance, which some would define as behind the curve, with reference to the US yield curve.
This means acting late, with respect to the actual economic situation, which for some could mean a recession. Moreover, an even more articulated and complex economic picture seems to emerge, if one considers a further indicator predictive,
Where is the US economy going? Recession, expansion or stagnation? So how are things?
Yield curve
Having made the necessary premises, we are going to attempt an answer to the question relating to the stars and stripes economy.
The yield curve of a country’s government bonds almost always precedes significant changes in the economic trend. Moreover confirmed, this time, by the trend of inflation.
When the curve turns downwards, ie presenting a structure of higher short-term rates than medium and long-term rates, it tends to experience recessionary phases.
Instead it reverses to the upside, in case of anticipation of an economic recovery.
Its current configuration is decidedly bearish, and would suggest a period of economic contraction, perhaps already over.
A confirmation would seem to come from a peak in inflation which, having risen to over 5%, appears to be declining in recent months. In accordance with the predictive potential, according to the NBER, of this indicator.
GDP
The GDP, after some negative data, which lasted between April and September of last year, seems to be recovering, indicating that, perhaps, a period of new expansion is upon us again.
The unemployment rate
This indicator is at its lowest level in forty years, an indication that certainly does not bode in favor of a recession. Except for his recovery.
ISM indices
On the other hand, the ISM indices, linked to the performance of companies, report one possible recessionary trend underway.
Where is the US economy going? Conclusions
Given the not so consistent indicators, we can probably say that the US economy has certainly deteriorated. As would also appear to be confirmed by the inflation dynamics.
At the moment, leading indicators, such as the yield curve or the ISM indices, do not yet give an idea of a recovery.
So let’s say that we are in a situation in the balance, which could also open up to recovery prospects, such as the GDP trend and unemployment would suggest.
But in the face of a business with clear signs of deterioration, highlighted by the yield curve and ISM indices. As well as by inflation first above the peak of 5% and then in a downward phase.
Edited by Gian Piero Turlettiauthor of “Magic Box” And “PLT extension“
