The U.S. economy is set to continue growing through the end of 2013 unless a shock sends us into recession early, according to Societe Generale’s Aneta Markowska.Markowska cites four factors for her long-term outlook on U.S. growth.
The index is comprised of four leading indicators (nonfinancial profit margins, the ISM, equity returns and the yield curve) which are regressed on NBER cycle dates using a probit model. Combined, those indicators currently suggest near-zero odds that the US will experience a recession in the next 12 months. Of course, all models oversimplify reality and we take the results with a grain of salt. We interpret it to mean that probability of a home-grown recession is indeed very low and the risks are largely external.
She also feels that, because of the high level of unemployment in the U.S. right now, a recession may not actually come until 2014, because the slack labour in the market will prevent wage pressures from hitting businesses.
There are, however, some threats lurking. Markowska cites the U.S. fiscal debt crisis and rising commodity prices as two events that could speed up the downturn. We’d add a Chinese hard landing or the European sovereign debt crisis to the list of potential recession accelerators.
Note that right now, the chance of a recession in the next 12-months is rock bottom. But also, previous experience shows that probability can quickly change.
Photo: Societe Generale
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