The Recovery Is About To End Very Soon, But It's For All The Right Reasons

Here’s a nice little reminder from Deutsche Bank — The U.S. economic output recovery (GDP) will soon be coming to an end… though not due to a double-dip but rather due to the fact that U.S. GDP will break above its last pre-crisis peak, and begin making new record highs again.

The recovery will be over and expansion will begin, any time now:


Moreover, there’s a twist even. Since 1947 the U.S. economy has never double-dipped into recession before first surpassing its pre-recession peak according to Deutsche Bank. This means that even if the U.S. economy is heading for a double dip recession (another period of GDP contraction coming soon after the most recent one), it’s likely that it would first surpass its pre-crisis GDP peak before doing so. This means we’re probably in the clear until at least mid-way through 2011, and actually Deutsche even doesn’t forecast a double dip.

Deutsche’s Carl Riccadonna:

In fact, from 1947 to present the economy has never fallen back into recession without first exceeding the pre-recession peak in output. Since we are not projecting the economy to cross into expansion until Q4-2010/Q1-2011, it would be unprecedented for the economy to relapse into contraction in the meantime. This follows logically, because recessions typically lead to a correction of imbalances, such as excessive inventory levels, abnormally low household savings or overinvestment in housing or capex. As the recession subsides, the newly rebalanced economy subsequently has greater resilience as the next cycle begins.

(Via Deutsche Bank, Recovery set to become expansion in near term, 18 October 2010)

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