The “Indicator” article from February 2000 discusses the decade cycle, focussing on economic expansions and recessions, particularly in the U.S. The last recession ended in March 1991, making the current expansion (as of February 2000) one of the longest in history, lasting 107 months. Historically, the decade cycle has run around 8 to 11 years, with the U.S. and Australian economies closely correlated.

This current cycle has been characterized by slower, more sustainable growth, low inflation, and increased technological innovation. The cycle is now in its peak phase, and while an economic downturn isn’t expected soon, inflation remains a key indicator to watch for future shifts.

The decade cycle

Where are we?

The previous recession has been officially dated as having ended in July 1991. (US March 1991) In the past, the decade cycle has run around 8 to 11 years, trough to trough (ie recession to recession).

Measuring the world’s largest economy, the US, from cycle peak to trough, the following dates can be ascertained:

Source: US National Bureau of Economic Research.

From the last US recession, March 1991, to the present time, say Feb 2000, will be 107 months in duration. This compares to previously measured expansions (trough to peak) in the 1960s at 106 months, and in the 1980s of 92 months. You can see this current cycle expansion is in the record books now.

The correlation of the US decade cycle, and Australia is quite close.

It is usual for each cycle to run in a similar sequence of events but have its own defining characteristics. This cycle has already been noted for its longer, slower and more sustainable level of business activity. (As EIS suggested it would.) And with the much lower levels of inflation, it is possible for business to maintain a longer-term investment outlook. Technological innovation flourishes in such conditions.

We put the cycle at around twelve o’clock, moving into one o’clock now. The decade cycle is in top gear certainly. Given the nature of the entrepreneurial activity now taking place, and the investment being undertaken by big businesses in emerging technologies, it is difficult to see a significant economic downturn taking place in the short term. Just note the order that is next from one o’clock. Much will depend on the inflation level over the coming months. This is the figure to watch.