Recession fears ease, but GDP growth still slowing

The news of an apparent trade “deal” between the US and China has pushed back the threat of further tariffs and helped to un-invert the yield curve, but economic growth still appears to be slowing. Our tracking estimate suggests that growth slowed to 1.5% annualised in the third quarter and the incoming survey data are consistent with a further dip to 1.0% annualised in the fourth quarter. With the most reliable leading indicators, including the yield curve, building permits and jobless claims all suggesting that the risks of a recession, while still elevated, are fading, we suspect the Fed will continue to cut interest rates once or twice more over the closing months of this year.