The Chairman of the US Federal Reserve says there will be no recession this year. His revered predecessor, Alan Greenspan, says that there will.
Who can say for sure? However, since predict we all must, in order to plan for the year ahead, here are some warning signs that preceded past recessions. How many can you see around you?
1. Overvalued stock market or property market or both.
2. Heavy borrowing by the public sector or the private sector or both.
3. Increasing commodity prices.
4. Increasing rates of corporate insolvencies, private bankruptcies, and foreclosures.
5. Large numbers of people reliant on jobs that add no value to the economy.
6. Low private sector investment rates.
7. Pressure for restrictions on free trade.
8. An increasing public sector supported by a private sector that is not growing at the same rate.
9. Pressure for wage inflation.
10. Reliance on a small number of sectors or individual businesses.
It is not necessary for all ten signals to be present at the same time. Indeed, there are usually two or three to be found even in a healthy economy at any one time.
However, if five or more are clearly visible in a national economy, that nation is vulnerable to recession.
That does not mean recession is inevitable, but it does mean that even the most insignificant blow to business confidence might be enough to trigger a panic.
Be aware of the possibility, and take precautions now – just in case.