The Economy Will Recuperate

May 19, 2009 07:00 PM

Linda Smith, Top Producer Executive Editor
We were due for a cyclical downturn anyway, but the banking crisis caused a gash in the economy, notes Bruce Scherr, CEO of Informa Economics. "But it was triaged swiftly and the bailout applies an economic tourniquet. Now, the banking system is on the mend,” he says.
This recession will last a total of 22 months, Scherr predicts. That is long (average is 10 months and the previous longest was 15 months) but, overall, the depth will be typical—about -3%. "Conditions now are extraordinarily better than six months ago,” he says.
However, unemployment may not peak until next spring, in the 9.5% range, because it is something of a lagging indicator.
By the third quarter of 2009, Scherr expects to see 2% to 3% growth in GDP—relatively anemic because of the deleveraging that has occurred. "Commodity inflation will pick up as the developing countries get back on the growth path, and U.S. companies will be challenged to become more efficient to cope with costs that consumers are not willing to have passed on to them. That will delay reinvestment here. But there are early signs that we've turned the corner.”

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