Why “recession” still shouldn’t be the only worry word

The US probably won’t go into recession again in the next two years. And by that I mean it’s more likely that they won’t than that they will.  Larry Summers and Goldman Sachs both now estimate a one-in-three chance of a double-dip recession.

But as I mentioned before, the definition of “recession” isn’t as important as it’s made out to be. It has a definition, let’s not try to redefine it otherwise we’ll end up with no clear definition at all. But just because a country isn’t in a recession doesn’t make it all rosy.

Continued growth below potential increase the output gap, generally leads to a stagnation or decline in employment and makes citizens feel poorer. Recession or no, this is what the guys I listen to are forecasting for the US.

And no, nobody with any remaining credibility is predicting hyperinflation for the US anytime soon. (There are so many sources, but this from the Federal Reserve Bank of Cleveland.)

Percent change from previous month
Jan Feb Mar Apr May Jun
CPI 0.4 0.5 0.5 0.4 0.2 -0.2
CPI less food and energy 0.2 0.2 0.1 0.2 0.3 0.3
16% trimmed-mean CPI 0.2 0.3 0.2 0.3 0.2 0.1
Median CPI 0.2 0.2 0.1 0.2 0.2 0.1
Percent change, past 12 months
Jan Feb Mar Apr May Jun
CPI* 1.6 2.1 2.7 3.2 3.6 3.6
CPI less food and energy* 1.0 1.1 1.2 1.3 1.5 1.6
16% trimmed-mean CPI 1.0 1.2 1.5 1.7 1.9 2.0
Median CPI 0.8 1.0 1.2 1.4 1.5 1.6
Note: All data are seasonally adjusted.
*Calculated using nonseasonally adjusted indexes.

Published by David Kirk

The opinions expressed on this site are those of the author and other commenters and are not necessarily those of his employer or any other organisation. David Kirk runs Milliman’s actuarial consulting practice in Africa. He is an actuary and is the creator of New Business Margin on Revenue. He specialises in risk and capital management, regulatory change and insurance strategy . He also has extensive experience in embedded value reporting, insurance-related IFRS and share option valuation.

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