Monday, December 20, 2010

Cleveland Fed Predicts 1 Percent Real GDP Growth Next Year

From the Cleveland Fed, "Yield Curve and Predicted GDP Growth: December 2010":
Projecting forward using past values of the spread [10 yr - 3 mos US Treasury yield] and GDP growth suggests that real GDP will grow at about a 1.0 percent rate over the next year, the same projection as in October and September. Although the time horizons do not match exactly, this comes in on the more pessimistic side of other forecasts, although, like them, it does show moderate growth for the year.
Using the yield curve to predict whether or not the economy will be in recession in the future, we estimate that the expected chance of the economy being in a recession next December is 1.5 percent. This drop from November’s 2.3 percent and October’s 3.9 percent reflects the steeper yield curve.

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