The long and short of the recession

The long and short of the recession

What if the recession that now appears to be ending is actually two recessions—the low point in a relatively short (5-7 year) economic cycle on top of the low point in a much longer (30-year) cycle

What if the recession that now appears to be ending is actually two recessions—the low point in a relatively short (5-7 year) economic cycle on top of the low point in a much longer (30-year) cycle?

According to Noël Perry, sr. consultant and principal with Transport Fundamentals, that may be exactly the case. If it is, then businesses need to plan for both a short-term and a long-term recovery period ahead.

“There is pretty good historical evidence that there are long cycles as well as short cycles in economics,” said Perry. “In other words, you can see thirty-year economic cycles upon which five-year cycles are imposed. A long cycle begins with slow growth, then the growth accelerates up to the point of a major recession and then it all starts again, with more minor peaks and recessions in between. We are at the turning point of a long and a short cycle now, so we have to forecast the recovery for both.”

The low point of the last long economic cycle was in 1980-1982, according to Perry, when an energy crisis, runaway inflation and the end of America’s “rustbelt” economy brought the country to a major recession. This time, another energy crisis, huge over-borrowing and the rise of a gigantic new market competitor, China, triggered the fall.

“Fleets need to be aware of the fact that they may have six good months to two years ahead [the short cycle], but it won’t last,” he said. “That is not to say we won’t have a nice recovery, we will, but then things will slow back down again. On average, the outlook for the next ten years is for slower growth.”

Bart van Ark, chief economist with the Conference Board, noted that long-term, global growth should resume in 2010 and gain steam into 2016 as economies other than China will help fuel growth.

“Looking further out, emerging and developing economies will account for a much larger share of the global pie; as much as two-thirds by 2016,” van Ark said. “And while China will surely be a major force in the unwinding of the crisis, we'll see other emerging markets increasingly fueling global growth.”

He said the advanced economies’ share of world GDP has fallen from two-thirds in 2000 to below 50% today and will hit one-third by 2016, according to The Conference Board’s Global Economic Outlook. China will remain a dominant economic force, but its growth will gradually slow as its transition proceeds to a consumer-driven economy, van Ark added.

TAGS: News
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish