David Rosenberg: What comes after a peak yield curve inversion? Nothing good EconguyRosie
But the fallout is that too much growth was front-end-loaded this cycle, so there isn’t much left in the tank. For all the talk of economic resiliency, the reality is that average quarterly real GDP growth in the U.S. ran at a stall-speed of less than one per cent through the entirety of 2022, and real final private demand completely stagnated in the final three months.
The question becomes what typically happens in the year that follows the first year of the Fed tightening cycle. Not once in any cycle back to 1959 did the economy fail to slow down, and the average haircut to real GDP growth is 260 basis points.Article content If nonfarm payrolls and the unemployment rate lag the cycle, with the former peaking into the early months of the downturn and the latter bottoming in the early stages, it wouldn’t be the last time. The fact that the Fed is chasing lagging indicators will only ensure that the recession is deeper and lasts longer than would have been necessary. But all in the name of underpinning the perceived loss of Fed credibility and ensuring that the inflation genie is placed back into the bottle for good.
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