Australian (ASX) Stock Market Forum

Recession? What recession?

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According to Mises institute the yield curve is now at its deepest point in 40 years.
According to some, inverted yield curve is a pointer to recession coming in the not too distant future.
1690074944346.png

In June, the average gap was -1.67. That's far deeper into negative territory than anything we've seen since 1981, 42 years ago. As we noted on the podcast, these sorts of inversions have reliably preceded recessions for several decades. As we can see in this graph that takes a longer time frame going back 50 years, the recession of the 1970s and the 1980 recession and the severe 1981-1982 recession were all preceded by a yield curve inversion. Moreover, to find an inversion deeper as the current one, we have to go back to 1980.
1690075096094.png

Mick
 
mullokintyre said:
One of those classic "cause and effects" conundrums.
Does the recession start because of the reversion from inversion, or does the inversion reduce because the economy has started to slide into recession?
Mick
Click to expand...

Does it matter? That's an academic debate.

It's a reliable indicator for someone trying to guess which direction the market will be heading.
 
waterbottle said:
Coincides with manufacturing PMIs being below 50...
Click to expand...
1690240134540.png

Interesting comment in the report, in keeping with the recent near 20% rise in crude:
“Both manufacturing and service sector input prices
rose in July suggesting the new financial year has
potentially brought with it an increase in business
costs. While the next major inflation number is the
official Q2 results from the ABS, it is the July data that
will be of most interest. The July numbers will give
us a good idea of whether inflation is falling in line
with what we are seeing in other countries in recent
weeks, or if Australia is set to experience a more sticky
inflation trend in 2023/24
Click to expand...
 
mullokintyre said:
Is it possible that we are using the wrong metric to measure Recession?
Click to expand...

For what it is worth, the RBA advises there is no one definition of a recession. So may as well make one up which confirms what we want to believe. That solves the issue.

"The output of an economy usually increases over time. However, growth in economic output fluctuates, forming a ‘business cycle’ in which there are peaks and troughs in economic activity. In the trough of a business cycle, output growth can be weak or negative. This usually results in job losses and an increase in the unemployment rate. While there is no single definition of recession, it is generally agreed that a recession occurs when there is a period of reduced output and a significant increase in the unemployment rate. Views differ about how to best identify this. Recessions inflict great hardship on households and businesses, and they can have long-lasting effects on both society and the economy. Consequently, central banks and other policymakers try to reduce the frequency and severity of recessions. Monetary policy is one of the main tools used to do this."

www.rba.gov.au

Recession | Explainer | Education

This series provides short, concise explanations for various economics topics.
www.rba.gov.au www.rba.gov.au
 
Central Banks , this time , seem to be going to great lengths to deny the presence of a recession

to some ( like me ) those denials make me more convinced there are tougher times coming , regardless of the current description

and the frequent tweaking of data measurement( and collection ) only erodes my confidence in official data even further
 

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