US Recession Watch Overview:
- The US Treasury yield curve has steepened in recent weeks (long-end rates rising faster than short-end rates), but that might not mean that the US economy is out of the woods from the coronavirus pandemic.
- Q4’20 Atlanta Fed GDPNow projects an +11.2% real quarterly growth rate, but data momentum is slowing, and it’s possible that failure by the US Congress to agree to fiscal stimulus will handicap the economy in Q1’21.
- Traders continue to anticipate no change in interest rates by the Federal Reserve through January 2022; the Fed has promised to keep rates low through 2023.
Making Sense of US Economic Data
The US economy is in the midst of a record-setting recovery, or is about to fall back into recession – depending upon who you ask. Timeframe matters. With only a few weeks left in Q4’20, it appears that another strong quarter is in the books: the Atlanta Fed GDPNow growth tracker is suggesting that we could see a real quarterly growth rate around +11.2%, per available data through December 9. Amid the initial coronavirus vaccine deployments, the US Treasury yield curve is at its steepest place in weeks.
And yet, something is amiss. US economic data is moving in the wrong direction. The Citi Economic Surprise Index, a gauge of economic data momentum, is currently sitting at +75.8, down by more than -72% from its high set in July at +270.8. For the first time since early-October, US initial jobless claims are back above 800K per week. The November US jobs report was much weaker than anticipated.
Atlanta Fed GDPNow Q4’20 US GDP Estimate (December 14, 2020) (Chart 1)
The trope “winter is coming” may be overused, but its an apt turn of phrase here. The window with which to positively impact
