Recession probability indicator rises in October

The probability of a US recession rose to 7.34 percent in October, according to a relatively new recession probability indicator.?

By SoldAtTheTop,?Guest blogger / January 7, 2013

This graph tracks US recession probability, which reached 7.34 percent in October 2012.

SoldAtTheTop

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Last year?I reported on a relatively new recession probability?indicator (? the ?markov switching? series recently introduced to the Fed FRED/Blytic) that was giving a pretty clear, though preliminary, indication of probable recession.

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Writer, The PaperEconomy Blog

'SoldAtTheTop' is not a pessimist by nature but a true skeptic and realist who prefers solid and sustained evidence of fundamental economic recovery to 'Goldilocks,' 'Green Shoots,' 'Mustard Seeds,' and wholesale speculation.

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While I noted that the series was highly revised, I pointed out that even taking into account the revisions, the series was giving a recession signal since using just the "maximum" reported values (values that had been all been revised lower) the reporting 20% probability was very unusual and typically associated to oncoming trouble.

In the latest release, the October data (... there is a reporting lag) indicates that the?probability of recession has risen to 7.34% while the standout August value (that initially peaked?interest in this series) has now been revised to 4.46%.

It's important to note though that the point of my prior post was to highlight just the "maximum" reported values and while the latest release revises down August's 19.6% and reports an additional low probability for the latest month, it makes no difference... the fact remains that this series has NOT given such a significant over estimate of recession without there being a probable recession ahead.

Now clearly, there could always be a first time... this is just estimated data... but the prior 19.6% reported figure clearly argues for following this series very closely in the coming months. ?

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Source: http://rss.csmonitor.com/~r/feeds/csm/~3/l9RL5pjKTvY/Recession-probability-indicator-rises-in-October

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