Thursday, 10 September 2009

Recession - Pick your Shape

Is the recession over? There has been a great deal of discussion lately about "coming out of recession" with sides being taken on the basis of (a) whether the recession is ending and (b) what shape it is or has been.

The BBC have an interesting time line on their web site today which shows the DOW and FTSE100 since 2007 (click on the graphic above to see a larger version or click here to go to the BBC's interactive version). The "shape" discussions have been may and various - I use Nouriel Roubini (I've put a link to one version of his opinion - there are many), Dan Hamilton and Lord Mandleson. They talk about a "double dip" recession - where the current upturn is the middle of the "W" shape. Other analysts see different shapes and have different views of where the economy is going. There are "U" shape economists, "V" shape economists and the those of the "it's all rather complicated and I'd prefer not to make a prediction" school (who are possibly the most sensible).

Looking at the picture above, I can see a W - but then I can see a "V" and and "U" as well. Given how much the markets can be dominated by sentiment and by confidence, I think that we would all be sensible to see a cautious recovery in place. The important thing is not the shape of the recession - it is in understanding and taking responsibility for the causes of the recession. As a group of economies, all countries should try to learn the lessons of the past and make sure that this type of recession doesn't happen again, and that we are in reasonable shape to survive a different kind of future recession, as Alan Greenspan precdicts.

Think positive - it not only helps you, but it might just help the economic recovery.

1 comment:

  1. I have no doubt that, as normal, optimistic SMEs will be forecasting a hockey-stick recovery and for once I must say that I agree... provided the hockey stick is laying with its handle on a ream of A4 paper. Companies should prepare themselves for a long haul.