Recession in the U.S.
Many economists ever since the Fed started hiking rates have been predicting a recession in 2023 or 2024. The inverted yield curve and different consumer surveys also have been suggesting an imminent recession. Instead, argues Jeffrey Frankel, there is plenty of evidence that the U.S. is going though a soft landing:
- GDP growth: despite the monetary tightening GDP growth has averaged 1.8% over the past four quarters.
- Labor market: over the first half of this year, job growth averaged 278,000 per month, while the unemployment rate remained at 3.6% in June, nearly matching the low levels of the late 1960s.
- Inflation: the June CPI release showed a 12-month inflation rate of 3%, a significant decline from June 2022, when the inflation rate peaked at 9.1%.
The probability of a recession is roughly 15% in any given year. Even though the chances of a recession are much higher now, owing to the Fed’s rapid interest-rate hikes, I would still put the likelihood of one happening in the next 12 months at less than 50%.
Is the US Economy Headed for a Soft Landing?
By: Jeffrey Frankel – Harvard University
Recession in China
There is a lot of talk that China is dangerously slowing down as well. Recent economic releases could justify some optimism, argues Menzie Chinn, as they showed that both Q2 GDP and June industrial production were above consensus:
But the overall concerns remain, especially since:
Industrial production growth has slowed:
There is a decline in inward FDI mostly due to the elevated levels of uncertainty related to the ongoing trade war between the U.S. and China:
There is a fear of inflation as consumer prices are flat, and producer prices are falling:
China in Recession?
China Upside Surprise
By: Menzie Chinn – University of Wisconsin–Madison
