Johannes Müller (DWS) | Three months ago, we warned that: “The outlook for the world economy is getting cloudier. Escalating trade tensions could trigger further downgrades.” Sadly, this has now come to pass. In several export-oriented economies, notably Germany and Japan, we had to cut our growth forecasts for both 2019 and 2020. For the U.S., we have left our 2020 forecast unchanged at 2%, but now expect just 2.3% for 2019, 0.2% less than three months ago.
Jeroen Blokland (Robeco) | The yield curve for US 10 year/ 3 month Trasury bonds inverted in March. This phenomenon has accurately predicted the last seven recessions. However, analysis shows that is does not cause extreme variations in returns on assets.
There is a statistic link between profits and investment, in the US, so a drop in the former determines a recession in the following quarter. But the Trump effect is likely to mean another imminent recession will have to wait.
BoAML | After Brexit, we followed through on our scenario analysis, penciling in a full-blown UK recession, cutting 0.5% off of Euro Area growth and slicing 0.2% off of US and global growth. Events since Brexit have not changed our call. The pound has plunged more than 11% since the vote, and both consumer and business confidence have tumbled.
James Alexander via Historinhas | Scott Sumner made a somewhat light-hearted comment in a recent post that “no-one can predict recessions”. It made me stop and wonder what was the point of Market Monetarism in that case. The essence of MM is that market forecasts of NGDP Growth should guide monetary policy, should be monetary policy.
MADRID | The Corner | The Japanese economy unexpectedly entered recession in the third quarter, just after the GDP decreased by an annualised pace of 1.6 per cent, versus forecasts that it would rebound by 2.2 per cent. Japan contracted by 0.4% in the 3Q14, leaving the country in a technical recession, which drove the Nikkei to near 3% losses and raised serious questions about the planned sales tax hike next year.
MADRID | By JP Marin Arrese | The gloomy angst triggered by the most prolonged recession ever witnessed by the Spanish economy in modern times is over. After nine successive quarters of GDP decline, the Central Bank gauges national production might have increased at a meagre 0.1% in the last quarter. This announcement has come as a bolstering relief for government. Ministers openly claim that growth is firmly back on track, the reform plans implemented last year being granted full credit in propelling the economy out of trouble.
NEW YORK |The Federal Reserve is perhaps one of the most important political factors behind the slow but steady US economic recovery -the country is growing at a 2.5% pace a year despite Europe’s recession and China’s slowdown-. But also, and here comes a problem, America’s central bank could be behind the crazy Wall Street rally.
MADRID | By Javier Flores, analyst at Asinver | The question, of course, is how long it will take for the curve to head downwards. No expansion lasts for ever.
By CaixaBank research team, in Barcelona | As was expected, Italy saw a considerable drop in its GDP in the first quarter, namely 0.8%, higher than the one recorded in the last two quarters. This suggests that the recession is biting deeper and shows just how deep. The year-on-year rate of change in GDP therefore fell to -1.3%. This contraction in the level of the activity can be explained by…