The Monkey Shack

RGE Monitor, chaired by NYU professor and economic expert Nouriel Roubini, has been incredibly accurate with their economic forecasts the past three years. Here is some of what they see ahead for the US economy is 2009:

“With the industrial world already in outright recession and the emerging world navigating towards a hard landing (growth well below potential) we expect global growth to be flat (around -0.5%) in 2009. This will be the worst global recession in decades as the fallout of the most severe financial crisis since the Great Depression took a toll first on the U.S. and then – via a variety of channels of recoupling – on the rest of the global economy.

“We forecast that the United States economy is only half way through a recession that started in December 2007 and will be the longest and most severe in the post war period. U.S. GDP will continue to contract throughout all of 2009 for a cumulative output loss of 5%.

“One last look at 2008 will reveal a very weak fourth quarter with GDP growth contracting about -6%, in the wake of a sharp fall in personal consumption and private domestic investment. We see the real GDP growth contraction playing out through the year as follows: Q1 2009 -5%; Q2 2009 -4%; Q3 2009. -2.5%; Q4 2009 -1%, adding up to a yearly real GDP growth of -3.4% for the U.S. in 2009; our forecast is much worse than the current consensus forecast seeing a growth recovery in the second half of 2009; we also predict significantly weak growth recovery – well below potential - in 2010. Canada entered recession at the end of 2008, and the outlook for 2009 is likely to be worse, with the economy contracting by an estimated 1.5-2% for the year.”

RGE’s prediction is interesting in that their time frame for recovery, first half of 2010, aligns with what other financial analysts are projecting as the point at which housing prices will become again affordable, meaning that household incomes and home value ratios will return to pre-2000 levels.

So what does it all mean? First, notice the contraction in GDP growth slowly recovers in 2009 from the low point of -6% we hit last quarter. This means we appear to have reached the bottom of the “trough” in this U-shaped recession.

Second and most importantly, even though recovery at times seems a point in the distant future, it is not. Whether the recovery actually begins in the second half of 2009 or first half of 2010, it is now visible on the horizon. The time to help begin planning for the recovery is now. Even a short-term 12-18 month marketing plan has to include planning for how the business will operate and market itself during and following the upcoming recovery.