Today from Goldman Sachs (Milo, Struyven, Revisiting Recession Facts):
We think the risk of a recession next year is 30% in the US, 40% in the euro area and 45% in the UK. …Our subjective recession probability is significantly higher than the average 15% probability that advanced economies have entered recession unconditionally every year since the 1960s.
Robin Brooks There has been an emphasis on an impending (yet yet) global recession. This makes me wonder if Europe has ever had a recession and the US didn’t. Here is a list of recession dates (peaks and valleys) for CEPR versus NBER US recession dates.
There was a recession in the euro area in the early 1990s and another recession in the euro area in 2011-12. Interestingly, CEPR_EABCN EABCDC Announcement on November 21, 2021 The following observations are made on the negative growth in the two quarters:
Based on available data, the negative GDP growth in the two quarters of 2020Q4 and 2021Q1 is judged to be part of the unstable expansion that started after 2020Q2. A special recovery comes after a special recession.
This is closely related to its practicality The rule of thumb for two consecutive quarters of negative growth mentioned by many.
So, there are two recessions that are not the same as the U.S. recession.
Figure 2 shows a comparison of the US and Eurozone GDP Q/Q annualized.
figure 2: Quarter-on-quarter growth in GDP, SAAR in the US (blue), Eurozone 19 (tan). Both use log difference calculations. Source: BEA, EuroStat via FRED, author’s calculations.
Over the period 1995-2019, the correlation of Q/Q growth rates is about 0.28; a 1 percentage point change in US growth correlates with a 0.54 percentage point change in Euro area growth. Therefore, Q/Q growth may diverge.
The June release of EuroCOIN, which should represent a smoothed monthly GDP q/q growth rate for the Eurozone, has not been annualized to 0.88% (thus, annualized is about 3.6%.
resource: CEPR, July 5, 2022.
The probability of such a GS recession in the US is slightly lower than Bloomberg Today (38%), but certainly higher than the normal term spread model (see here).
