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Saturday, May 11, 2002

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If only you knew you're okay

D. Murali

AT TIMES, you get good news from staid economists too. The US National Bureau of Economic Research, the academic panel that studies business cycles, has moved a step closer to declaring an end to the recession that began last March. The six-member panel notes that payroll employment steadied early this year and "there are other indications that the recession may have ended".

One can appreciate caution before any official announcement about the end of a slump, lest there be a renewal of economic weakness after "irrational exuberance" on recovery. And that works both ways. The NBER economists had declared the birth of recession when it was already about eight months old.

But what are the indicators that lead one to confidently declare that the downturn is over?

The serious-minded look at how well-performing, leading indicators, such as average weekly manufacturing hours, stock prices, interest rate spread, index of consumer expectations, vendor performance, and manufacturers' new orders for goods try to outstrip the laggards, such as claims for unemployment insurance, money supply, global instability, and so on.

There are other indicators too: For instance, the index of industrial production, personal income, manufacturing and trade sales, loans outstanding, average duration of unemployment, change in labour cost per unit of output, consumer instalment credit, and inventories. Provided you get the data right and quick.

In its April 2002 update, the Asia Economic Monitor (AEM), `a quarterly review of East Asia's growth and recovery, financial and corporate sector reforms, and social developments', stated that East Asia is moving from last year's sharp and `synchronised slowdown' to a `faster-than-expected-but moderate-rebound'. When economies start to pick up, theoretically there is a stronger domestic demand and renewed business confidence. And, perhaps, more smiles to go around.

Each sector has its own pet notions about recovery. Ask the I-T man and he would say that when there is an increased use of outside expertise — both in consulting and services, enhanced consumption of critical Internet-related services and a rise in purchase of computer hardware, you can be sure that the chips are not down.

A construction chap looks at recovery when more earth is dug out to make way for new construction. For the newspaper hawker, the indicator is number of copies sold. And, for the kids, it happens when parents complain less about `not being able to afford' or `oh, that's too expensive'.For a barber, however, recession ends when people stop wearing a clumsy beard and long hair. Good times start when you put your hands into your pocket and feel cash. For those who probe others' pockets, recession is when wallets are full of unpaid bills.

When recovery is around, employees update their resumes, sensing greener pastures, housewives junk leftover food rather than stash it in the fridge, clocks seem to run faster, TV serials have less tragic themes, people don't run their vehicles in reserve, and the smiles that models flash in commercials do not look too plastic.

For the hardcore pessimists, however, truth lies in one line: "You aren't dead until you're pronounced to be."

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