From this morning’s Breakfast With Dave note, a look at where things stand regarding the odds of a double dip:
Well, well, the ECRI fell again in the latest week despite the rebound from the
equity market bounce. The spot index fell 0.6% for the second week in a row, and
the growth index slipped to -8.3% from -7.6% at the end of June. While this is the
only indicator so far suggesting that recession odds are rising, once you get to
-8.3%, looking at the historical record, downturns occur more often than not.
Who cares what the consensus of economists has to say. They started calling
for recession only after Lehman failed in 2008 (remember that Gene Epstein
ditty from last week?) and it had already began nine months earlier; and back in
2001 it was only after 9/11 that the consensus call was for recession and yet
the recession had already started six months earlier and had only two more
months to run. Our ECRI logit model suggests that double-dip risks rose to 55%
odds in the latest week from 52%. It’s a close call but the odds of another
recession are higher than generally perceived.
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