Too Much Pessimism On U.S. Economic Outlook?

Finanza Operativa di Finanza Operativa 10 Gennaio 2019 | 16:30

A cura di Radaecowatch

The debate on the U.S. economic outlook has intensified over the last few weeks, with many commentators calling for a recession in 2019. Indeed, many economic indicators have recently pointed to a deceleration of economic activity, with the government shutdown that could accelerate the trend. The estimates of the negative impact of a 2/3 weeks government shutdown go from 0.2% to 0.4% on a quarterly basis. The impact could be even stronger if the shutdown last longer as public workers without a paycheck could further reduce their consumer spending.

The flattening of the yield curve has been the most utilized indicators from analysts calling for a recession in 2019. The 10 year-3 months government bond yields spread has declined from 104bp 1 year ago to 25 basis point. An inversion of the yield of course has been a reliable leading indicator for a recession in the past as indicated by the following chart.

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10 year - 3 months spread

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Too Much Pessimism On U.S. Economic Outlook?