Have you seen some of the business press headlines lately? "Back to recovery" or "early signs of growth" are scattered throughout the newspapers, suggesting that the worst is over? But Is it really?
The arbiter of such things, the NBER in the US is silent on the matter and has not yet signaled that the recession is over.
What's the biggest question on the mind of most executives and politicians today? Are we back to normal or is this time different?
Even Noriel Roubini the uber bear, has had an about face on economic sentiments from 2009, All last year he consistantly forecast that we were heading into a U-shaped recovery in the USA [timing undertermined however]. Now he's warning of the possibility of a double dip recession based on recent poor economic stats. (last seen in the 15 years of the Great Depression in the 1930's in the USA and briefly in 1981, due to the oil shock.)
Nouriel Roubini's EconoMonitor
"However, the last two weeks of poor economic data suggest that the probability of a W, a double-dip recession, is rising."
And here from a recent poll of financial executives in the USA (sense any Over Optimism bias at play here? The economy is bad, but we will do better? Export? Outsource ? Grow overseas? M&A? Cut Bottom Line?)
Executives Fear Double-Dip Recession Insurance Networking News, March 4, 2010 by Bill Kenealy
A growing expectation of a double-dip” recession is evident in a new poll of financial executives. Conducted quarterly by Mountain View, Calif.-based Adaptive Planning and Palo Alto-based Business Performance Management Forum, the poll found more than half of financial executives predicting another downturn, and most expecting jobs recovery to lag into 2011. Specifically, the Q1 2010 Business Volatility and Variables Survey revealed that 51% predict a “W-shaped” recovery, up from 46% a quarter ago.
Moreover, 72% expect that a recovery will not occur until the second half of 2010 or later and 67% expect that a meaningful improvement in jobs will not occur until 2011 or beyond.
However, while less than sanguine about the economy at large, respondents have brighter expectations for their companies. Indeed, more than half (55%) expect revenue growth for their company over the next six months, while 25% expect to add jobs—more than the 17% that project jobs growth from the broader economy in the next two quarters.
“Taken together, these results illustrate an extremely mixed outlook for both the economy and corporate performance over the foreseeable future,” said William Soward, CEO of Adaptive Planning said in a statement. “While there are downside risks from a possible double-dip recession, there is also the potential for upside surprises, given the fact that the company-specific outlook is brighter than that for the overall economy. In either case, the successful companies will be those that are able to plan for multiple scenarios, closely monitor their actual performance, and respond quickly (agility) to changes in their business and operating environments.”
Then there is the overhanging soverign debt issue in many developed countries, which I've cited here before. Two well known US economists, Reinhart and Rogoff found that historically in a developed economy, once public debt reaches 90 percent of economic output, it starts strangling a country’s economic growth. (Greece and 20 other countries are a prime example) Remember, we've regularly rescued one or two bankrupt countries every decade for 400 year. But what happens this time around when potentially all the dominoes come crashing down together and everybody needs a bailout all at once (the domino scenario?)