One of the questions I am most frequently asked at seminars is “When will the U.S. economy turn around?” On a humorous side note, a number of Aussie bankers asked that question within the pretext of “What are the factors we need to be watching for when you ‘yanks’ have the economic ship in shape?”
First, it will probably be in the next decade before the economic correction occurs. Before your blood pressure starts to rise, the next decade is only 12 months ahead of us. A typical recession usually lasts 11 months; however, in recent years it has been reduced to seven months with longer periods of business expansion.
As global and economic forces have come together, it appears that this recession could be long and deep. The first part of 2009 will be a period of job losses both here and abroad. One can expect a period of deflation before the economic stimulus packages succeed in inflating the economy. That being said, this appears to be an 18-27-month recession for the U.S. Do not be surprised if the economy emerges to positive growth, only to recede back into a recession.
One has to think globally in the recovery picture. Two-thirds of the world’s economic activity is generated in North America, the Euro region and Japan; therefore, recovery in the U.S. may be predicated on recovery in these other regions.
The wild card is Asia, particularly China and the ASEAN Region. If this area goes into a recession, defined as 3% growth or less, then deflation and a long-term recovery is indeed the most logical scenario for the U.S.
Next time I will discuss factors to watch in the economic recovery.
Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at firstname.lastname@example.org.