Gaining a Supply Chain Edge

Give Recession Recovery the Respect it Deserves

There is nothing like a seven-hour flight to London, followed by a four-hour layover and a one-hour flight to Switzerland, to really get caught up on your reading and fully grasp where we are with The Great Comeback.

Well, I have good news about the impending economic recovery. There is very clear proof that The Great Recession is behind us and The Great Comeback has begun, as I predicted in my recent Executive Briefing, The Great Recession Gives Way To The Great Comeback.

Consider:

* In a thoughtful article on May 19 in The Wall Street Journal entitled "The Economy's Engine As It Sputters Along," it poignantly says: "The economy spews forth a stream of data daily. But at recession's end, news typically turns mixed, as it has lately." Furthermore, "Economists expect the GDP will resume growing this summer." So, yes, you can find negative data if that is your objective, but the message is clear: We have hit bottom and are recovering.

* In a May 21 front page article, The Wall Street Journal reports on the global fall of GDP in Q109, which we all knew, but then states: "Most forecasters and governments see signs that the current quarter will be better than the first, and the rise in global stock markets suggests investors believe the worst is past." Clearly, we have hit bottom and are in recovery.

* Also, on May 21, an excellent report by SmartMoney presented the results of an analysis by Robert J. Gordon, an acclaimed macroeconomist, professor at Northeastern University and one of the seven members of the elite Business Cycle Dating Committee of the National Bureau of Economic Analysis. Gordon uses unemployment benefits to predict the recession is over. Interestingly, the unemployment numbers in this report are consistent with the unemployment numbers I project in the Executive Briefing. The article concludes: "There is too much evidence that the worst is over for this economy. We've seen the worst. The bottom is in."

* Again on May 21, and this time in USA Today: "Welcome signs that the economy's decline slowed in April, along with hopes for the government's stimulus spending, caused the Fed's staff to upwardly revise its growth estimate for the second half of the year." Also, interestingly, this article continues to have 2009 GDP and unemployment rates higher than I feel are correct, but nevertheless, the premise of the article is that recovery has begun.

* Finally, in a May 22 Wall Street Journal article entitled "Economy Shows Signs of Recovery," it notes: "In a sign that economic recovery may be near, the Conference Board said its index of leading economic indicators rose 1% in April after seven straight monthly declines. It was the largest gain in nearly four years." Reading this, it is very clear that we have hit bottom and recovery is ongoing.

So, the evidence is unmistakable without much editorializing on my part. Nevertheless, there are three big points that still need to be made:

1. Some have put forth the view that we are recovering, but that we are in store for a "W" recovery. These folks believe the second dip of the "W" will occur as a result of a commercial real estate meltdown that will impact the economy just like the residential real estate meltdown of 2008. I do agree that commercial real estate will be ugly, but the impact will be nowhere close to the impact of the residential real estate crisis. Evidence that supports my view includes:

* Credit conditions have improved markedly since the credit conditions of September, 2008.

* Financial markets are pointing to recovery. Investors are out of the panic mode.

* The government "stress tests" of the banking system have identified weak links in the banking system and there are ongoing efforts to resolve the problem banks.

* The global markets for credit default swaps have recovered, and there is no evidence to indicate that another crisis such as the residential real estate crisis will occur.

2. Yes, we will continue to receive bad news on the economy. Of course, there are folks who want to look at the automotive industry, the housing industry and problems with specific companies. But, the big picture is clear. The Great Recession is history and you need to take action now on your Great Comeback.

3. I read somewhere that this recovery should be called the "Rodney Dangerfield Recession Recovery." Why Rodney Dangerfield? Because it is happening, but "It don't get no respect." Recall in my Executive Briefing on The Great Comeback, I concluded that, "There is a hesitation, a reluctance, to predict recovery or comeback. The natural recession bunker mentality is to believe that the bad times of The Great Recession will continue." Well, this too is true - although the Great Recession is behind us, some still want to hang their heads and continue to be negative.

An even larger truth lies in the need to have a sense of urgency about recovery planning. Organizations that do not focus on Comeback Planning now may very well be putting themselves at risk. It is time to come out of the bunker and get on with planning The Great Comeback. Where are you? Where is your company? It is time to shake off the funk of the recession and get on with the future.

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