Recession Risk Is Rising, Economists Say

[mahatmakanejeeves]

ECONOMY | THE OUTLOOK

Recession Risk Is Rising, Economists Say

Forecasters raise probability of economic contraction in next 12 months to 28% as Fed tightens to beat back inflation

By Gwynn Guilford and
Anthony DeBarros
April 10, 2022 8:00 am ET

Economists see a growing risk of recession as the relentlessly strong U.S. economy whips up inflation, likely bringing a heavy-handed response from the Federal Reserve.

Economists surveyed by The Wall Street Journal this month on average put the probability of the economy being in recession sometime in the next 12 months at 28%, up from 18% in January and just 13% a year ago.

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1. CPI expectations month over month: 1.1% (that's a 14.0% annualized rate)

A lot of gloom at Yahoo Finance! this morning over the Fed's likely reaction, e.g. our good friend Emily McCormick:

On Tuesday, traders are set to receive the latest Consumer Price Index from the Bureau of Labor Statistics, which is expected to show a staggering 8.4% year-over-year increase in prices for the biggest leap since 1982. And this comes as Fed officials have increasingly talked of larger-than-average 50 basis-point interest rate hikes this year to help bring down prices. Last week, the Fed's March meeting minutes also showed the central bank was gearing up to begin rolling off assets from its $9 trillion balance sheet, in a further move removing financial market support and pivoting away from pandemic-era accommodative policies.

"If we think about recent cycles that are comparable, I think about 2018, 2019, the Fed was raising interest rates and running off its balance sheet. That should sound very familiar," Seth Carpenter, global chief economist for Morgan Stanley, told Yahoo Finance on Friday. "But at the end of 2018, risk markets started to crack and the Fed reversed course really quickly."

2018 was the first and only negative full calendar year for the S&P 500 (-4.23% total return) since 2008
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html

The below is from the MarketWatch economic calendar] which includes economists' expectations that mahatmakanejeeves posted yesterday

Last Period ....... Expected
0.8% ................ 1.1% CPI monthly
7.9% ................ 8.4% CPI year-over-year
0.8% ................ 1.1% PPI monthly

A 1.1% monthly inflation annualized is 14.0% (1.011^12 - 1)*100%

The CPI report comes out tomorrow, April 12, the PPI report comes out Wednesday April 13.

Another report that comes out with the CPI report Tuesday is the real (i.e. inflation adjusted) earnings of production and non-supervisory workers

Nominal: http://data.bls.gov/timeseries/CES0500000008 (came out Friday April 1)
Real: http://data.bls.gov/timeseries/CES0500000032 (to be released Tue. April 12)