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Tags: mit | recession | economy

MIT Study: 70 Percent Chance of Recession Within Six Months

MIT Study: 70 Percent Chance of Recession Within Six Months
(Artistashmita/Dreamstime)

By    |   Thursday, 06 February 2020 06:16 PM

A new study from the MIT Sloan School of Management and State Street Associate reportedly has found a 70% chance that a recession will occur in the next six months.

The researchers used a scientific approach initially developed to measure human skulls to determine how the relationship of four factors compares to prior recessions, CNBC explained.

The index currently stands at 76%. Looking at data back to 1916, the researchers found that once the index topped 70%, the likelihood of a recession rose to 70%.

“The Mahalanobis distance was originally conceived to measure the statistical similarity of the values of a set of dimensions for a given skull to the average values of those dimensions for a chosen group of skulls,” the researchers explained.

It measures the distance between a point and a certain distribution.

"Using this principle, the researchers analyzed four market factors — industrial production, nonfarm payrolls, stock market return and the slope of the yield curve — on a monthly basis. They then measured how the current relationship between the four metrics compares to historical readings," CNBC said.

Meanwhile, some experts say lackluster productivity is squeezing corporate profits. Economists say this could make businesses, which have already cut back on capital expenditures, cautious about hiring.

"Compression of profit margins usually precedes a recession, as it causes businesses to become more cautious," said Ryan Sweet, a senior economist at Moodys' Analytics in West Chester, Pennsylvania. "This is likely one factor behind the recent weakness in business investment," he told Reuters.

For his part, President Donald Trump continues to cheer the economy and stock market higher on seemingly a daily basis.

The United States is in its 11th year of a record-setting economic expansion, a fact that Trump highlighted in his State of the Union speech to Congress on Tuesday.

With "The Great American Comeback" as its theme, Trump focused for much of the speech on the strength of the U.S. economy and achievements to support it, like a China trade deal and a new trade pact with Mexico and Canada, Reuters explained.

"I am thrilled to report to you tonight that our economy is the best it has ever been," Trump said.

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A new study from the MIT Sloan School of Management and State Street Associate says there’s a 70% chance that a recession will occur in the next six months.
mit, recession, economy
363
2020-16-06
Thursday, 06 February 2020 06:16 PM
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