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Monday, December 24, 2007
December 2007
67% probability of recession in US
payroll employment
personal income COINCIDENT INDICATORS
under 1420 sp500 would be fall in stockmarket
invariably associated with recession
Inflation is LAGGING indicator - 2 quarters after GDP peak
therefore inflation can be higher in recession
BUT 1970s inflation wa caused by SUPPLY DISRUPTION
Increase in global DEMAND now means growth is LESS not a CONTRACTION
Slowdown in economy will cause oil prices to fall,
What we do see for 2008 is an economy teetering on the brink of recession, energy prices falling as growth in the global demand for energy slows and the price increases of non-energy goods and services slowing as growth in the demand for these goods and services slows. We see the Federal Reserve continuing to lower the federal funds rate – down to 3.25% -- in an attempt either to prevent a recession or to mitigate the economic effects of a recession. Despite the lower federal funds rate, we see a sharp slowing in the growth of credit as financial intermediaries are constrained in their ability to lend because of losses incurred on prior lending.
67% probability of recession in US
payroll employment
personal income COINCIDENT INDICATORS
under 1420 sp500 would be fall in stockmarket
invariably associated with recession
Inflation is LAGGING indicator - 2 quarters after GDP peak
therefore inflation can be higher in recession
BUT 1970s inflation wa caused by SUPPLY DISRUPTION
Increase in global DEMAND now means growth is LESS not a CONTRACTION
Slowdown in economy will cause oil prices to fall,
What we do see for 2008 is an economy teetering on the brink of recession, energy prices falling as growth in the global demand for energy slows and the price increases of non-energy goods and services slowing as growth in the demand for these goods and services slows. We see the Federal Reserve continuing to lower the federal funds rate – down to 3.25% -- in an attempt either to prevent a recession or to mitigate the economic effects of a recession. Despite the lower federal funds rate, we see a sharp slowing in the growth of credit as financial intermediaries are constrained in their ability to lend because of losses incurred on prior lending.