NY Federal Reserve’s Recession Indicator 2012-07-01 to 2012-07-31

Summary:
The New York Fed's indicator of a recession one year from now took another uptick in July, increasing by 0.85 percentage points from one month prior. Not only is this the fourth consecutive month of an increasing probability of a recession, but this is the highest figure observed since January 2008. However, as this indicator is driven by changes to the yield curve--or the spread between the yields of ten-year and three-month Treasuries--it continues to fluctuate almost entirely on Fed policy. Moreover, the changes to the yield curve remain highly correlated with changes to the yield on ten-year Treasuries, since three-month Treasury yields are essentially at zero.