US recession risk eases – Westpac

“US recession risk has tumbled, on our modelling, the probability is down to a negligible 11% from 33%,” writes Richard Franulovich – Head of FX Strategy at Westpac.

Key Quotes:

The flattening of the curve and softening PMI/consumer surveys had been driving much of the lift in recession probabilities through Q2 and Q3. But as trade war tensions abated and Brexit tail risk declined these same indicators are driving a decline in recession probability. Soft surveys have recovered from their lows, albeit only modestly, equities have been hitting all-time highs, the curve is re-steepening and credit has continued to tighten. That, and a recovery in Oct payrolls has driven the implied probability of recession down sharply once again.