These two questions arise before every recession. However, typically these questions have no unambiguous answer. For example, recent empirical experience for the US recession of 2007-2009 shows that many contemporary methods and models used for recession forecasting are not as accurate as desired. It provides permanent ambiguity and incompleteness of information used for decision-making that may cause some time lag with providing economic incentives to fight a recession (see “case studies” section of our site).
However, sometimes the economic situation is rather clear (for example, the US recession that started on February 2020) to find the recession inevitability and determined its starting point as the recession was significantly strengthened by such external factors as COVID-19. Somebody may even believe that COVID has caused the recession of 2020. But, regardless of the initial driving force of the recession, in this case, there was no time lag in providing economic incentives, which were extraordinarily powerful (interest rate + quantitative easing (QE)). In contrast, in 2008 there was a time lag (about half a year) between the interest rate decreasing and QE starting that, particularly, increased the recession of 2007-2009 duration as compared with the recession started on February 2020.
Perhaps, today’s economic situation in the US economy is like one that happened at the end of 1970th and the beginning of 1980th, when extremely high inflation made it impossible for the Fed to stimulate the economy. Nowadays, the Fed has a very short list of economic incentives (maybe interest rate only) as inflation dramatically exceeds its target goal. Moreover, to reach its goal the Fed should continue to raise interest rates, making an incentive for a new recession. It may explain why many economists have no doubts that the new US recession is inevitable.
However, economists forecast a very different date for a new recession starting point: from the IV quarter of 2022 to 2024. It looks that the new US recession may be rather deep and prolonged as it is expected to accompany the EU recession and even the World’s recession as a whole. Besides, central banks have rather a short list of instruments to incentive their economies. Moreover, permanent ambiguity and incompleteness of information used for decision-making may cause a time lag in providing economic incentives to fight a recession.
Nevertheless, today we can provide information to our subscribers about the date of the new US recession starting point with the accuracy of about 1 quarter showing them graphically the process of the recession starting and then ending in our monthly releases.
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Assessment of the US economic situation at the end of Q2 2022
On July 28, the US Bureau of Economic Analysis released GDP data for Q2 2022.