503-785-3485
bill@conerlyconsulting.com
  • Facebook
  • Twitter
  • Linkedin
Conerly Consulting Conerly Consulting
  • Consulting
    • Approach/Philosophy
    • Sounding Board
    • Economics and Business Strategy
    • Assessment
    • Case Studies
    • Testimonials
  • Speaking
    • The Package
    • Topics
    • Testimonials
  • Writing
    • Businomics Newsletter
    • Businomics
    • The Flexible Stance
    • Blog
  • Industries
    • Banking/Finance
    • Manufacturing
    • Other Industries
  • Video
    • Speaking
    • Event Promotion
    • Business Planning
  • About
    • News Coverage
  • Contact
  • Consulting
    • Approach/Philosophy
    • Sounding Board
    • Economics and Business Strategy
    • Assessment
    • Case Studies
    • Testimonials
  • Speaking
    • The Package
    • Topics
    • Testimonials
  • Writing
    • Businomics Newsletter
    • Businomics
    • The Flexible Stance
    • Blog
  • Industries
    • Banking/Finance
    • Manufacturing
    • Other Industries
  • Video
    • Speaking
    • Event Promotion
    • Business Planning
  • About
    • News Coverage
  • Contact
  • Home
  • Economy
  • How Strong Will the Recovery Be?

Economy

24 Jul 2009

How Strong Will the Recovery Be?

  • By Bill Conerly
  • In Economy

I'll be updating my economic forecast in early August, taking a little longer than usual because of a major revision in the GDP statistics and their underlying components.  (Data wonks read this.)  However, it's never too soon to think about the strengths and weaknesses of the recovery.  Before getting into that, though, let's look at a chart that comes courtesy of David Altig of Macroblog:

6a00d8341c834f53ef0115713bd64c970c-400wi

It took me a minute to figure it out.  The horizontal axis of the chart shows the depth of the recession.  The vertical axis shows the strength of the recovery.  The points within the red circle are historic data for past recessions.  The points within the blue circle are predicted values from the Blue Chip Economic Indicators survey.

Look at how this historical data tend to fit along an upward-sloping trend.  Because the two axes use different scales, it may not be apparent that the line of best fit is pretty steep.  By eyeball, recessions with a two percentage point drop in GDP are usually followed by a six percent gain in GDP.

Now look at the Blue Chip consensus.  Even the most optimistic forecasters are much more pessimistic than historical experience.  (But that's OK–it's quite possible that we will expand the envelope of historical experience here.)

For the record, my current (meaning old) forecast has 2.8% growth of GDP in the four quarters that begin the recovery, so I'm more optimistic than average, but less optimistic than the 10 biggest optimists.  I'm also more pessimistic than historic average experience.

Now let's do the conceptual tally:

Factors leading to an economic recovery:

The high savings rate has put money into consumers' pockets
Monetary stimulus has been very strong
Inventories will swing from negative to positive forces
The weak sectors, such as housing construction, can't get much worse

Factors that will limit the strength of the recovery:
The residential construction sector will not rebound, because of excess supply
Consumers will be moderate in their spending rebound
Credit limitations will limit some business and consumer spending
Uncertainty about government policy will trigger delays in spending decisions

How will tax hikes and the deficit affect the economy?
Tax hikes will have negative effects in the short run, but my reading of economic history is that they do not trash the economy in the short run.  They will limit our growth by a bit, which will accumulate like compound interest (but with a negative effect rather than a positive effect) over time.  I don't expect the deficit per se to have a big effect, except that it will trigger tax increases.

Will inflation accelerate in 2010?
There will certainly be some inflation acceleration in my economic forecast, but nothing like the early 1980s.  That's because I think the Federal Reserve will begin tightening next year.  But keep your fingers crossed.

Question for readers:  What other items should I report to you when I complete my forecast?  Leave a comment.

  • Share:
Bill Conerly

Search

Sign Up For Our Newsletter!

View Latest Issue

RSS Bill’s Forbes Articles

  • Trade Shows Will Regain Importance After The Covid-19 Pandemic March 1, 2021
    The benefits of exhibiting will help trade shows and conventions to resume, though with some changes.

Testimonials

Bill assisted O.B. Williams Company with developing a strong business plan that we implemented 18 months ago. As a result and together with Bill, we are improving our position within our highly competitive market segment.
David Wick, CEO, O.B. Williams Company (wood products)
Thank you for a wonderful presentation. Everyone who heard your presentation was impressed with your analysis, and strong command of facts and theory. More importantly, your ability to weave together substance with humor, in a very dynamic way, meant our attendees learned and retained more information than we would have typically expected. You made economics fun and you left our members with powerful insights on trends and issues to consider as they prepare for the future.
John Aguirre, Oregon Association of Nurseries
As you know, it can be difficult to find economists who provide good substantive information who are so entertaining and engaging. I received many enthusiastic comments from members and others in attendance. I was very pleased with Dr. Conerly and have recommended him to NCSTAE, our national organization.
Molly Steckel, Idaho Telecom Alliance
Bill is a delight and easy to work with. The client thought he was great and delivered value to their group. I would definitely recommend Bill.
Andrea Gold, Gold Stars Speakers Bureau
AgFirst Farm Credit Bank has benefitted from Bill Conerly’s unique insights and perspectives several times over the past five years…his materials consistently cover the points that we agree on…he has been very well-received by our groups, and we look forward to having Bill with us again in the future.
Ronnie Hucks, AgFirst Farm Credit, Columbia
Our audience of local business and community leaders not only valued the economic data you provided, but they really appreciated that you made it applicable to their businesses, their personal lives and moreover – that you presented it in a clear and entertaining manner.
Scott Boyer, Mountain Pacific Bank
Bill was a great resource in helping us develop our business model and has continued to be a great advisor as we have refined it and successfully entered the marketplace.
John Courtney, CEO, NextJob, Inc.
Bill did a great job! There were many in the audience who liked him and many in the audience who loved him! Bill shared pertinent and timely information with our audience of commercial real estate professionals and added interesting stories and a funny sense of humor twist.
Jana Knoll, BOMA Boise
Bill Conerly is one of the most interesting and engaging speakers I have ever heard. The fact that he is a very funny man is a bonus.
James A. Kronenberg, Oregon Medical Association
We asked Bill Conerly to look at one of the major factors limiting the growth of our business. He pulled together data from a wide range of sources, as well as his own extensive business knowledge, to give us an insight into when conditions would improve and how we could be ready to capitalize on better times. He did so in a straight forward, easy to understand manner. A year later it was clear that things had evolved just as he had forecast. Ever since then he’s been my go-to guy on how the e…
Len Ludwig, former CEO, Vencore Capital LLC

Get in touch

(503) 785-3485

bill@conerlyconsulting.com

PO Box 2188
Lake Oswego, OR 97035

Useful Links

  • Consulting
  • Speaking
  • Videos
  • Blog
  • Press
  • Contact

Social Links

  • Facebook
  • Twitter
  • Linkedin

Newsletters

Copyright 2020 Conerly Consulting LLC