Macroscope | A global recession is on the way, but it’s likely to be mild
Kerry Craig says while a down cycle will inevitably follow America’s currently buoyant growth, a catastrophic downturn like the 2008 global financial crisis is unlikely. Debt levels are more manageable, and the imbalances in the economy less severe
To say the US expansion is long in the tooth is an understatement. If the current expansion continues until the middle of next year, it will be the longest in US history. It would be rare for an expansion to last more than a few years beyond this point without overheating.
The severity of a recession is dictated by what causes it, and usually the ballooning of any imbalances in the economy; the bigger the imbalance, the more severe the outcome.
This cycle may be different. Due to the inflation-targeting regimes of the central banks or the responsiveness of companies to the economic shifts, the US economy’s growth profile has become more stable over time. Between 1947 and 1985, the average growth rate of the American economy was 3.7 per cent. As the economy has matured, the growth rate has slowed, but it has also become less volatile.