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Looking Ahead to 2013: A Theoretical Economic Moment

A friend recently asked whether a “soft landing” should be followed by a “soft recovery” especially given the use of sinusoidal curves (sine waves) in describing economic cycles.

There certainly could be a soft recovery following a soft landing but not because of the slope of the downturn. Our projection of stability to mild rise in early 2013 is not driven by the slowdown (soft landing) in U.S. Industrial Production that began in April 2011 and ended in April 12. Think in terms of a ball hitting the ground at a certain angle. It will have the same slope going up only if there is no spin on the ball. There seems to be plenty of "spin" and "spit" being applied at the moment.   

Our forecast is based on business cycle theory, a certain set of assumptions regarding Federal Reserve Board action, Congressional action, and the time that it takes for those initiatives to impact the economy. In short, we have estimated what the “spin” on the ball will be in 2013. Surprises do happen and radical changes can occur, so we encourage you to keep current through our publications and this blog.  

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