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Why No V-Bound in This Recession?

Analysts have not seen the 'v' rebound in GDP following the 2008-09 recession.

In the midst of an uncertain economy and a shaky (or questionable) recovery, analysts have regularly looked to the past for any hint of what is in store for global markets.

As Mark Wynne writes for the Federal Reserve Bank of Dallas, "Conventional wisdom holds that severe recessions are usually followed by strong recoveries." Despite the economy bouncing up after the Q2 1958, Q1 1961 and Q4 1984 recessions and the poor GDP seen in Q1 1975 (which didn't meet the author's recession metric), that "V" rebound has yet to appear following the most recent recession. The V-bound was also missing from the "milder downturn(s)" in 1990 and 2001.

So why is the most recent downturn different? Wynne hypothesizes this is because the 2008 recession was preceded by a banking crisis, which was not the case in all the aforementioned recessions. Banking crisis-related downturns are usually more serious, which is why it takes longer to recover.

But the U.S. recovery does not operate in a vacuum. While the recent recovery does not match up to earlier U.S. performance, Wynne notes that in comparison to how other countries have fared following the 2008 crisis, the U.S. is on par.

European recovery is also slower, as the European Commission announced EU manufacturing production was little changed from the first quarter of this year.  

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