{"id":4672,"date":"2023-06-28T11:54:55","date_gmt":"2023-06-28T11:54:55","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=4672"},"modified":"2025-03-27T15:50:40","modified_gmt":"2025-03-27T15:50:40","slug":"uk-recession-gauge-in-red-zone-before-q2-rate-hikes","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=4672","title":{"rendered":"UK recession gauge in red zone before Q2 rate hikes"},"content":{"rendered":"<p>A recession likelihood gauge placing weight on monetary variables indicates a high probability of a contraction in UK GDP \/ gross value added (GVA) over the remainder of 2023.&nbsp;<\/p>\n<p>The indicator, regularly referenced in posts here, is based on a model that generates projections for the four-quarter change in GVA three quarters in advance using current and lagged values of a range of monetary and financial inputs.&nbsp;<\/p>\n<p>Using data up to June 2022, the model assigned a 70% probability to the four-quarter change in GVA being negative in Q1 2023. The current ONS estimate of this change is +0.2%.&nbsp;<\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"https:\/\/newstar.squarespace.com\/storage\/280623c1.png?__SQUARESPACE_CACHEVERSION=1687944996072\" alt=\"\" \/><\/span><\/span><\/p>\n<p>The probability reading rises to 96% incorporating data through March 2023, i.e. there is a 96%&nbsp;likelihood of the four-quarter change in GVA in Q4 2023 being negative, according to the model.&nbsp;<\/p>\n<p>The statistical analysis underlying the model indicates that GDP prospects are significantly influenced by movements in real narrow money (non-financial M1) and real corporate broad money (M4). Six-month rates of change of these measures have moved deeper into negative territory since mid-2022.&nbsp;<\/p>\n<p>The model&rsquo;s increased pessimism also reflects a deepening inversion of the yield curve and falling real house prices. Other inputs include credit spreads and local share prices, which have yet to display recession-scale weakness.<\/p>\n<p>&#8212;&#8211;<br \/>\nCOMMENT:<br \/>\nAUTHOR: David Cotton<br \/>\nEMAIL:<br \/>\nIP: 82.132.214.43<br \/>\nURL:<br \/>\nDATE: 06\/28\/2023 11:54:55 AM<\/p>\n<p>Hopefully the Fed will give cover for  other central banks to cut rates in H2. <\/p>\n<p>At this stage it&#39;s hard for me to imagine them acting unilaterally.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A recession likelihood gauge placing weight on monetary variables indicates a high probability of a contraction in UK GDP \/ gross value added (GVA) over the remainder of 2023.&nbsp; The indicator, regularly referenced in posts here, is based on a model that generates projections for the four-quarter change in GVA three quarters in advance using [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-4672","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/4672","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4672"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/4672\/revisions"}],"predecessor-version":[{"id":6981,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/4672\/revisions\/6981"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4672"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4672"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4672"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}