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By New_Deal_democrat September 9, 2016 12:41 pm
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Where are we on the Road to the Next Recession?
A few months ago, I wrote 
a reasonably likely road map to the next recession looks like this:
1. Interest rates continue to fail to make new lows.
2. House prices and stock prices stop meaningfully appreciating.
3. Inflation picks up to 2% or more as energy prices begin to go up again.
4. Maybe - the Fed raises rates in response to increased CPI readings, perhaps enough to invert the yield curve.
5. Corporate lending stalls, housing turns down, and consumer spending begins to turn down, resulting in a recession.

Since that time, Brexit caused treasury and corporate bond yields to reach new lows -- but, tellingly, not mortgage rates: 

House prices acceleration has weakened, but a surge in new home sales makes me think that appreciation will resume soon:

The stock market has also made new highs:

Energy prices may well have bottomed, as the YoY change in gas prices has abated to less than -5% (compared with -15% or -20% a year ago):

And commodity prices in general as measured by the PPI have increased, although the CPI is still nowhere near 2% or higher:

The Fed is again sounding hawkish, although a September rate hike seems to be off the table.

So, in terms of my "road map," the next recession actually looks further off than it did 4 months ago.  Until we see a meaningful upturn in interest rates, and/or a downturn in the housing market, and at least a sustained period in which the stock market fails to make new highs, I just don't see the next recession materializing. But at the same time, the tailwind of lower commodity prices has abated and may be on the verge of turning into a headwind again.

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