Recession likely, modal response 2023Q1 or Q2. Median forecast q4/q4 2023 growth 1% (Survey responses here; FT article here):
Figure 1: Reported GDP (black), Atlanta Fed 12/6 nowcast (pink square), IGM-FT median forecast GDP level, based on Atlanta Fed nowcast (sky blue inverted triangle), 10th/90th percentile (blue gray +), and median Survey of Professional Forecasters level (dark blue), all in bn.Ch.2012$ SAAR, log scale. Light shading denotes start of recession – modal response from IGM-FT survey. Source: BEA 2022Q3 2nd release, Philadelphia Fed, Atlanta Fed (12/6), IGM-FT December survey, and author’s calculations.
It’s hard to see the predicted recession show up in the time series, but here’s the IGM-FT survey response, showing 48% of respondents indicating 2023Q1 or Q2 as most likely recession start (note – as determined by NBER, not by the informal 2-quarter-rule).
Source: IGM-FT December survey.
The Survey of Professional Forecasters (November 2022 release) does not poll on recession start, but places a high probability of negative GDP growth in 2023Q2 (49.4%) and slightly lesser in 2023Q1 (47.2%), and yet less in 2023Q3 (46.1%).
When will the Fed funds rates peak, and then be dropped? Those are questions 7 and 8:
Source: IGM-FT December survey.
Source: IGM-FT December survey.
The modal responses indicate a peak at 2023Q2, and drop in either 2023Q4 or 2024Q1. The SPF doesn’t poll on the Fed funds rate, but does poll on the three month Treasury yield which tracks the movements in the Fed funds rate fairly well. Broadly speaking, the SPF median is consistent with the IGM-FT modal response regarding this rate.
Figure 2: Three month Treasury yield (black), forecasted (teal), ten year Treasury yield (dark red), forecasted (pink), all in %. Light shading denotes start of recession – modal response from IGM-FT survey. Source: Treasury via FRED, Philadelphia Fed, IGM-FT December survey, and author’s calculations.
The SPF forecast includes a projection of the 10yr Treasury. The implied SPF forecast is for a 10yr-3mo spread of -0.09% in 2022Q4 (As of the first two months of Q4, is -0.03%). The figure shows a forecasted 5 quarter inversion, which is remarkably long; the inversion before the 2007 recession was only 3 quarters, that before the 2001 recession was less than 2 quarters.
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