A report by analysts from the Swiss bank UBS indicates that the probability that the US economy will enter a recession in the course of a year rose from 35% a 60%.
The specialists of the financial group monitor the performance every month and the evolution of the US economy to analyze the probabilities of contracting in 2023.
Economists analyze the probability of a recession in three areas: hard macroeconomic data, the Treasury bond yield curve, and credit information. The average of these three indicators represents the possibility of a recession in the country.
“The probability of being in a contraction phase is historically very high (94% in July compared to 35% in April) in the case of macro indicators”, pointed out the economists in their analysis.
“But in the current scenario, the modal forecast of the United States team is that the contraction does not turn into a full-fledged recession”, the experts added.
According to the UBS report, when analyzing the performance of Treasury bonds, the probability of a recession currently stands at 71%, based on the latest data from the parametric yield curve model of the FED, while in the credit segment the chances of falling into recession are only 35%.
The gross domestic product of the United States accumulates two consecutive quarterly contractions: the one corresponding to the first quarter of -1.6% and the last one of -0.6% (revised) in the second quarter of the year, although the country’s authorities ruled out that the economy is in a recession.
A few days ago, The Conference Board reported that the Leading Economic Index (LEI) for the United States decreased 0.4% in July from 2022 to 116.6 (2022=100), after declining 0.7% in June. The LEI fell 1.6% during the 6-month period from January to July 2022.
“The US LEI. declined for the fifth consecutive month in July, suggesting recession risks are rising in the near term,” said Ataman Ozyildirim, Senior Director for Economics at The Conference Board.
“Consumer pessimism and stock market volatility, as well as the slowdown in markets jobs, home construction and new manufacturing orders suggest that the economic weakness will intensify and spread more broadly throughout the US economy. The Conference Board projects that the US economy will not expand in the third quarter and could lead to a brief but mild recession by the end of the year or the beginning of 2023“, explained Ozyildirim.
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