12/20/2011

Slowest recovery since WWII

From Gene Epstein at Barron's:

. . . The recovery from the 2008-09 recession has been the slowest since any recession in the post-World War II era. It has taken nine calendar quarters since the recession ended in the second quarter of 2009 for real gross domestic product to climb back to its fourth-quarter '07 peak. Assume the same rates of growth during the recoveries from the two previous recessions that rank second and third in severity since World War II -- '81-'82 and '74-'75 -- and the recovery from the recent recession should have taken half as long.

Try other comparisons. In the more than 41 years since 1970, the average quarterly rate of growth, calculated on an annual basis, has been 2.8% -- and that includes all negative quarters in recessions. By contrast, over the recent nine quarters of recovery, the annual rate of growth has averaged just 2.4% -- and as mentioned in last week's column, the Blue Chip consensus forecast calls for more of the same through 2012. Following the recessions of '74-'75 and '81-'82, the first nine quarters of growth averaged, respectively, 5.1% and 6.3%.

Try special excuses. Yes, it's true that the government portion of GDP usually increases year-to-year, and over the past nine quarters there was a small decrease. It's also true that rebounds in housing usually make significant contributions to GDP growth after recessions, and over the past nine quarters residential investment has also been running slightly negative. . . .

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