What Predicts a Recession?
Although many economists use the yield curve to predict a recession, there is no one right way to do so.
Yield Curve
A yield curve simply compares the interest rates of various bonds with comparable values but distinct maturity dates. When the long-term bond interest rates fall below the short-term bond interest rates, the yield curve inverts, indicating a recession. For instance, a bond with a 10-year maturity time will yield more than a bond with a 2-year maturity time because the first bond experiences higher inflation and has an upward yield curve. However, an economy is said to be in a recession when this upward yield begins to sag and becomes inverted.
ISM purchasing managers’ index
A conference board leading economic index and an ISM purchasing managers index are two other factors that can accurately predict a recession.
Home Prices
It’s often believed that the housing sector can prior intimate about the upcoming recession. If there is a continuous drop in home prices for a longer period then it can be said that a recession is about to hit.
Recession: What it is and causes it?
Recession is one of the major factors that can disrupt the continuous economic growth of a nation. A large-scale, widespread economic downturn that hurts a nation’s economic growth is known as a recession. The standard rule of thumb is that an economy is said to be in a recession if it has a negative GDP for more than two consecutive quarters. However, even though this short period of recession, causes great damage to the country’s economy, as it results in unemployment, leading to increased poverty.
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