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It's beginning to look a lot like . . .1974

In this edition of Current Business Developments Robert C. Fry of the DuPont Economists's Office notes that on December 1, the National Bureau of Economic Research made it official: the U.S. economy reached a business cycle peak in December 2007 and has been in a recession since then. For the first seven months of the recession, through July, the decline in economic activity was very mild. The decline did not stop in July; it accelerated. The shift from mild decline to severe recession is very reminiscent of the 1973-75 recession.

The steep decline at the end of the 1973-75 recession lasted just six months. The next few months are likely to be very bad, but beyond that the outlook is uncertain. The unprecedented amount of
monetary stimulus will eventually fuel growth; the question is when and by how much? When recovery does come, it could initially be stronger than many expect. With leading indicators still pointing down, recovery is not likely to begin before next spring, but if this recession continues to follow the 1973-75 script, things could start to improve then.

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