A recession by any other name would mean as little

Posted by: Paul Donovan

14 Nov 2019
  • There is far, far too much hysteria about whether a country is in "recession" or not. There is no formal definition of the term. It is, however, easier to have two quarters negative growth today in an economy with an aging or declining population than it was in the past with population growth.
  • Should a German care whether this quarter's growth is -0.1% or +0.1%? Almost certainly not. The German economy has weakened – which a German should care about. Trade has slowed. Trade uncertainty has slowed investment. Germany exports investment goods. Around half the Eurozone's exports to China are investment goods – and Chinese investment is growing at the slowest pace in over twenty years.
  • UK consumers seem willing to ignore the interminably tedious EU-UK divorce (given the chance, economists would ignore it as well). The labor market and reasonable income growth should support retail sales data today.
  • Producer prices are due from the US, but are unlikely to influence Fed thinking. Fed Chair Powell, who is a lawyer not an economist, signalled little reason to lower US interest rates yesterday. Producer prices do give a reasonable signal of corporate pricing power, and how the trade taxes are being handled.