Summary:

The LRPI (Lighthouse Recession Probability Indicator) continues to indicate a one-in-nine likelihood for the US economy being in a recession. The implied recession probability remained at 11% in December compared to November.

For January, data available so far include a final reading of the University of Michigan Consumer Sentiment (73.8, up from 72.9 in December) and the Conference Board Consumer Confidence Index (58.6 down from 66.7). The January non-farm payroll report showed big upwards revisions for previous months, supporting the view of subdued recession risk. The ISM manufacturing survey came in at 53.1 versus a consensus of 50.7.

However, economic growth is weak, as shown by the -0.1% advance reading of Q4 GDP. It would not take much to tilt a lot of indicators into recessionary territory. Heightened vigilance is warranted, especially in regards to possible belt-tightening from the fiscal side.

Read the full report here.