Many economists and policy makers have been using letters to characterize recessions and their recoveries. We introduce the “swoosh-shaped” recovery.
There is no broadly accepted academic theory or classification system for recession shapes. The terminology is rather used as an informal, easy to understand shorthand notation to characterize recessions and their recoveries. The most commonly used terms are V-, U-, W-, and L-shaped recessions. And finally, we introduce the “swoosh-shaped” recovery.
Now more than ever our economic outlook is uncertain. We believe the probability of an L-shaped economic outlook is low as policy makers are employing a wide range of tools to avoid a long-lasting negative impact. Fortunately, the global economy is showing signs of life as activity levels are picking up, indicating that the probability of an L-shaped recession is declining. Simultaneously, the chance of a real V-shaped recovery is also decreasing. The lockdown measures are slowly being reversed, but this is done at a more cautious and slower pace than when the measures were imposed. Incoming survey data and high-frequency economic activity trackers are showing signs of a bottoming-out alongside the gradual easing of the containment measures. Still, the pickup in economic momentum has so far been tepid compared with the pace at which the indicators plummeted in the previous months.
