The economic recession is possible, and the mode responds to 2023Q1 or Q2. Q4/Q4 2023 median forecast growth of 1% (survey responses here; Financial Times article here):
figure 1: Reported GDP (black), Atlanta Fed 12/6 near-term forecast (pink squares), IGM-FT forecast median level of GDP based on Atlanta Fed near-term forecast (sky blue inverted triangle), 10th/90th percentile (blue Gray +) and survey median professional forecaster level (dark blue), all in bn.Ch.2012$ SAAR, logarithmic scale. Light shading indicates the onset of recession—the modal response from the IGM-FT survey. Source: BEA 2022Q3 Version 2, Federal Reserve Bank of Philadelphia, Federal Reserve Bank of Atlanta (12/6), IGM-FT December Surveyand the authors’ calculations.
It’s hard to see the predicted recession in a time series, but here’s a response to the IGM-FT survey showing 48% of respondents saying a recession is most likely to start in Q1 or Q2 2023 (note – as determined by NBER , rather than by the informal 2-quarter rule).
resource: IGM-FT December Survey.
Survey of Occupational Forecasters (Released November 2022) did not poll for the onset of a recession, but sees a high chance of negative GDP growth in Q2 2023 (49.4%), slightly less likely in Q1 2023 (47.2%), and in Q3 2023 ( 46.1%) are less likely.
When Will the Fed Funds Rate Peak and Fall? These are questions 7 and 8:
resource: IGM-FT December Survey.
resource: IGM-FT December Survey.
The modal response shows a peak in 2023Q2 and a decline in 2023Q4 or 2024Q1. The SPF does not poll the fed funds rate but does poll the three-month Treasury yield, which tracks the fed funds rate well. Broadly speaking, the median SPF is consistent with the IGM-FT modal response with respect to this rate.
figure 2: Three-month Treasury yield (black), forecast (teal), 10-year Treasury yield (dark red), forecast (pink), all in %. Light shading indicates the onset of recession—the modal response from the IGM-FT survey. Source: Treasury via FRED, Federal Reserve Bank of Philadelphia, IGM-FT December Surveyand the authors’ calculations.
The SPF forecast includes a forecast for the 10-year Treasury note. The implied SPF forecast is a 10-year-3-month spread of -0.09% in Q4 2022 (-0.03% as of the first two months of Q4). The graph shows the projected 5th quarter inversion, which is very long; the inversion before the 2007 recession was only 3 quarters, and the inversion before the 2001 recession was less than 2 quarters.
