From Bloomberg, “Trump Presses China to Make Tariff Offer to Calm Trade War”: “The ball is in China’s court. China needs to make a deal with us. We don’t have to make a deal with them,” White House Press Secretary Karoline Leavitt said…

An excellent overview is provided in this report, out today — although I’d say the title likely understates the situation confronting Wisconsin. Manufacturing and agriculture play an outsized role in Wisconsin’s economy, making exports essential. Yet since the mid-2010s, the value…

Here’s a visual sit-rep on prices for Americans. Figure 1: CPI – all urban (blue), CPI food at home (green), AIER Everyday Price Index (tan), all in logs 2024M12=0. Source: BLS, AIER, and author’s calculations. It is interesting that the AIER’s…

I’m coming up on lecturing on Fed independence and time consistency etc. President Trump continues to provide (depressingly) many episodes to discuss. No dearth of “current events” topics this term… What happened when Trump uttered these words? The probability of Powell…

GDPNow at essentially zero growth. Industrial production, retail sales (control) surprise downside. Figure 1: GDP (bold black), WSJ January survey mean (blue), WSJ April survey mean (tan), GDPNow of 4/16 (sky blue square), Goldman Sachs tracking forecast of 4/16 (inverted purple…

From Cui, NBC: President Donald Trump’s tariff agenda has thrown the financial world for a loop for much of the past month. The on-again, off-again trade escalation with other nations — most notably China — has upended markets with investors fleeing U.S. stocks in search of more stable ground.  And as…

Steve Kamin in the FT, Goodman in the NYT, Krugman on substack, FT Editorial Board write on how Trump policy erraticism on erosion of the dollar as a safe asset/exorbitant privilege. Kamin deploys regressions to support his conclusions: In the wake…

The GDP outlook is down markedly. I was insufficiently pessimistic (relative to WSJ survey respondents) regarding the GDP outlook. Figure 1: GDP (bold black), WSJ January survey mean (blue), WSJ April survey mean (tan), GDPNow of 4/9 (sky blue square), Chinn…

From NABE two days ago, responses pre- and post-“Liberation Day”: From the NABE statement: The initial April 2025 NABE Outlook presents the consensus macroeconomic forecast of a panel of 41 professional forecasters. The initial survey, covering the outlook for 2025 and…

NY Fed future financial situation “better off” revised up, but continues decline. Figure 1: U.Michigan expectations index (blue), and NY “better off” aggregate (tan), both demeaned and standardized (2013M06-2025M02). Source: U.Michigan, NY Fed, and author’s calculations.

Surprise!

The current reading of 50.8 is below the 73.4 average reading over NBER peak-to-trough recessions dates (1990M01-2025M03): Figure 1: University of Michigan Consumer Sentiment (blue, left scale), and Conference Board Consumer Confidence (tan, right scale). NBER defined peak-to-trough recession dates shaded…

Even if likely to be revised, it’s still remarkable. VIX down as high yield credit spread rises. And here’s a picture of credit risk spread for high yield corporate bonds over the same period (BofA):

From Bloomberg: President Donald Trump’s administration exempted smartphones, computers and other electronics from its so-called reciprocal tariffs, representing a major reprieve for global technology manufacturers including Apple Inc. and Nvidia Corp. even if it proves a temporary one. The exclusions, published late Friday by US Customs and…

No. Yes/No. Yes. Compare the U.Michigan survey to SF News Sentiment index and Conference Board: Figure 1: U.Michigan Economic Sentiment (blue), Conference Board Confidence Index (brown), SF Fed News Sentiment index (light green), all demeaned and divided by standard deviation 2021M01-2025m02.…

The egg crisis of 2025 is not over yet — consider what happens if tariffs are put on egg imports? Figure 1: Price of dozen eggs, retail, $ (blue, left log scale), ERS forecast of February (light blue inverted triangle), ERS…

Preliminary data today: Figure 1: One year inflation expectations, % (blue, left scale), and economic sentiment (tan, right scale). Trump administrations denoted by orange shading. Source: University of Michigan. The deterioration is concentrated in expectations, rather than in current conditions. Here’s…

Rates are down, but not as far down as in mid-2024. Figure 1: Instantaneous inflation for headline CPI (blue), core CPI (brown), per Eeckhout (2023), T=12, a=4.  Source: BLS via FRED, and author’s calculations. 

The yield curve looks like this as of today’s close: The EHTS implies that in 6 months, the 6 month Treasury yield will be 3.77%, compared to the current 4.17%. That is, yields will be 40 bps lower. That suggests close…

Two observations: (1) market odds of a downturn have rebounded today, and (2) the odds are very similar across two platforms (Kalshi, Polymarket), despite the fact the definitions of recession are different in the two markets. Polymarket pays if either NBER…

From CPI release today: Figure 1: CPI for food at home (black), USDA Economic Research Service forecast from January (blue square), from February (red triangle), from March (green inverted triangle), on log scale. Source: BLS via FRED, ERS, author’s calculations. Note…

I see repeated references to this assertion. As Jason Furman points out, relative to “Liberation Day” announcement, he didn’t, insofar as the increase in tariffs on Chinese goods rose from 54% to 125% even as reciprocal tariffs were delayed 90 days,…

A recap: For context, the 4/5 observation on EPU is the second highest value since 1985 (the first highest is 1/9).

Coincident index growth slows from 4.1% m/m AR to 1.7% in February. Figure 1: Implied Nonfarm Payroll early benchmark (NFP) (bold blue), civilian employment adjusted smoothed population controls (bold orange), manufacturing production (red), personal income excluding current transfers in Ch.2017$ (bold…

While the odds on a recession in 2025 have dropped from 69% to 54% in the wake of Trump’s 90 day pause, the predicted start of the recession has not changed much. A 52% probability is ascribed to a recession starting…

From Paweł Skrzypczyński, “Average effective tariff rate in the U.S.”: [This page] presents historical data on U.S. average effective tariff rate together with The Budget Lab at Yale estimate of this rate in 2025. The Budget Lab at Yale resources on trade…

Gianluca Benigno points out that large and pervasive tariffs will have macro implications that spur deleveraging and a decline in R** in a pernicious (my word) feedback loop. Source: G. Benigno (2025). The 10 year yield is surging, so some spreads…

Miran et al. want to end exorbitant privilege and the dollar’s role as a safe asset. Figure 1: US dollar reserves as share of allocated reserves (light blue), US dollar reserves plus 60% of unallocated reserves (bold dark blue). Trump election…

The time series, for 3m10s, 2s10s, as well as 1yr-FFR spread Miller (2019) identifies as max AUROC recession predictor at 1 month horizon. Figure 1: 10yr-3mo Treasury term spread (blue, left scale), 10yr-2yr Treasury term spread (red, left scale), 1yr-Fed funds (light…

Data available as of 11am CT today:

Here today: EC-CEPR-JIE conference, 7-8 April 2025, European Commission, Brussels Opening Remarks: Geraldine Mahieu (Director Investment, growth and structuralreforms, DG ECFIN, European Commission) Session I: “Globalization and Global Shocks”, Chair: Bjorn Dohring (DG ECFIN)“Global Supply Chain Disruptions and their Macroeconomic Effects”…

Today, we’re fortunate to have a guest contribution from Michael Bordo (Rutgers) and Robert N McCauley (BU & Oxford). A version of this post was published on VoxEU. Stephen Miran, Chair of the US Council of Economic Advisers, claims that we…

From Goldman Sachs, Sunday evening: We are lowering our 2025 Q4/Q4 GDP growth forecast to 0.5% and raising our 12-month recession probability from 35% to 45% following a sharp tightening in financial conditions, foreign consumer boycotts, and a continued spike in…

Inversion continues, with 10yr-3mo at same level as on 12/`6.  VIX at 45. Kalshi odds on a recession at 68%, highest since trading started in August. SP500 futures down 4.5% as of 7pm ET. So much winning!

Using data through March. Figure 1: Recession probability 1 month ahead (blue). NBER defined peak-to-trough recession dates shaded gray. Assumes no recession in March. Source: Author’s calculations. Pseudo R2 from probit regression of recession on y/y change in Michigan sentiment and…

Yesterday: I’m concerned about tariff policy impacting the economy. Usually fiscal, executive and trade policy decisions wouldn’t lead to an immediate recession, but these tariffs are a huge blunder. There have been other unforced errors – like cutting basic research spending…

NY Fed nowcast down. Figure 1: GDP (black), GDPNow of 4/1 (red triangle), GDPNow adjusted for gold imports  (pink square), NY Fed (blue square), Goldman Sachs (inverted green triangle), SPGMI (orange inverted triangle), Survey of Professional Forecasters (light blue), all in…

Mid-March to be specific. Figure 1: Nonfarm Payroll incl benchmark revision employment from CES (bold blue), implied NFP from preliminary benchmark through December (thin blue), civilian employment as reported (orange), industrial production (red), personal income excluding current transfers in Ch.2017$ (bold…

Even if the answer is yes, we won’t know for a long time. Here’s the odds on the recession start, with Q1 at 19%, same for Q2: Combining with the probability of recession in 2025: Between the two sets of betting…

Inversion deepens (see sky blue line vs. green line): Figure 1. Treasury yield curve, %. Source: US Treasury. Over time: Figure 2: 10yr-3mo Treasury term spread (blue, left scale), 10yr-2yr Treasury term spread (red, left scale), 1yr-Fed funds (light green), all in %, …

Odds of a recession in 2025: Source: Kalshi, 2 April 2025, 8pm CT. Polymarket confirms: Source: Polymarket, 2 April 2025, 8pm CT. The recession has been moved forward, at least in betting odds (over the past week): Source: Kalshi, 2 April…

From Bloomberg: “This is going to be much bigger than Smoot-Hawley,” says Douglas Irwin, an economic historian at Dartmouth College, who points to both the expected leap in tariff rates and the amount of trade covered as likely to eclipse what happened…

As of close today: Figure 1. Treasury yield curve, %. Source: US Treasury. Figure 2: 10yr-3mo Treasury term spread (blue, left scale), 10yr-2yr Treasury term spread (red, left scale), 1yr-Fed funds (light green), all in %,  VIX at close (green, right…

GDPNow as of today: Here’s a picture of the level of GDP implied by these nowcasts and tracking forecasts. Figure 1: GDP (black), GDPNow of 4/1 (red triangle), GDPNow adjusted for gold imports  (pink square), NY Fed (blue square), Goldman Sachs…

Aggregate consumption drops as income ex-current transfers rises. The pattern of disaggregated consumption pattern suggests tariff-induced front-loading drove some of the support for consumption in December. Figure 1: Personal consumption expenditures (black, left log scale), income ex-current transfers (red, right log…

Jim Hamilton (with others) answers the question in the San Diego  Union-Tribune: YES: Consumer sentiment is a useful economic indicator, though it is not the most important or reliable economic measure to which we should be paying attention. When coupled with the…

Using final March numbers: Figure 1: Bordo-Siklos measure of central bank credibility, using 5 year Michigan expectations (blue). Assumes 2.45% CPI inflation is consistent with 2% PCE deflator inflation. NBER defined peak-to-trough recession dates shaded gray. Light orange denotes Trump administration.…

Big drop in one year to two year part of the spectrum suggests deceleration in growth in a year. Time series:

Reader Bruce Hall comments on this post showing the implications of a short horizon probit model of recession likelihood. Perhaps I didn’t remember correctly, but during the Biden Administration when there were ongoing discussions about whether or not there had been…

From NBC via Bloomberg: “I hope they raise their prices, because if they do, people are going to buy American-made cars,” he said, repeating the phrase “I couldn’t care less” two more times in his lengthy answer. At long last, we…