Jim Reid at Deutsche Bank has produced an updated chart comparing this US recovery to US recoveries past (click to expand):
He writes:
The graph shows that of the 17 recoveries we have Nominal GDP data for back to 1921, the only weaker recovery coincided with the 1927 observation that was unfortunate to run into the 1929 stock market crash 2 years later. The 15 other cycles since 1921 have all seen higher Nominal GDP at this stage (10 quarters in) of the recovery. The average addition to Nominal GDP at this point is over 22%, with this recovery at 10.4%.
For our money, the 2001 recovery isn’t much better — which is not terribly reassuring, in itself, but also notable is that the 1927 recovery had well and truly begun to tank, this many quarters in.
Anyway, Reid says this raises two problems:
1) It shows that this is a very different recovery to most and one that we collectively have very little experience in analysing. The evidence is mounting all the time that growth is being held back by the end of the multi-decade debt super-cycle; 2) It makes it very difficult to grow quickly out of the huge debt problem. Indeed Debt/GDP ratios across the Western World are in many places still growing, especially in the public sector. So sluggish growth and high debts across the whole of the Western World leave us more vulnerable to shocks for a long period ahead. Although markets are in a healthy state at the moment it would only take a relatively mild cross-wind to expose the problems again. We desperately need decent growth across the Developed World in order to reduce the fragility of the system.
When you look at both the 2001 and 1991 recoveries — the two most recent preceding this one — it makes Reid’s final sentence a bit… poignant.
Related links:
‘Tis the seasonality – ISM edition – FT Alphaville
Deutsche’s Reid on shorter business cycles – FT Alphaville