US recession probability: 25% next 6 months – Wells Fargo

By FXStreet According to analysts from Wells Fargo, the probability of a recession in the US, based on their preferred modes is about 25% over the next six months, the highest since the Great recession era.

Key Quotes:

“Recent market volatility and data from the factory sector raise the question: Is the U.S. economy headed for a recession? Based on our preferred model, the chance of recession is about 25 percent over the next six months.”

“With two months of data for the current quarter, our preferred recession model remains elevated relative to the past few years. The Probit model we use to predict the chances of a recession estimates (using a handful of predictors) the probability of a recession during the next six months. The model utilizes the Leading Economic Index, the S&P 500 index and the Chicago-PMI employment index as predictors. Our model has served us well; it started predicting (in real-time) a significantly higher probability of recession back in 2007 (58 percent chance of a recession in Q3 2007). In addition, we never joined the “double-dip” camp back in 2010-2012, largely because our Probit model did not indicate a high-likelihood of recession during that time period.”

“Using the most recent …read more

Source:: FX Street