Recently, the Fed Reserve chairman Ben Bernanke announced that the US recession was most likely over. This “end of recession” announcement saw a surge in the Dow Jones as it closed at a record high of 9791.71 up by 108.30 points. None the less, even with the announcements of the end of recession the unemployment lines do not seem to be getting shorter nor do the number of people collecting long-term unemployment benefits, or are they? At the end of this the questions still remain what is the end of recession and what can you expect.

Even before Ben Bernanke made his announcement, President Barack Obama was hailing the end the recession as early as the month of August. Consumers are of the opinion that things are going to take a turn for the better. While this is true, it is not necessarily going to instantaneous. In its worst recession since the 1930’s, the US economy has a bit of recovery to do before things return to form of normality. Analysts and industry experts believe that the next couple of quarters will see some moderate yet steady growth and as the US economy rebuilds after the devastation of the economic meltdown. We have listed a few things that consumers can expect as we head of a recessionary phase:

The End of Recession – Increase In Prices & Interest Rates

One defining characteristic of a recovery or end of recession is the rise in prices of goods and services. This is nothing but a simple interaction of basic market forces of supply and demand. As the US economy heads out of a recession, and buyer confidence starts to build, there will be in upward surge in demand. With the increase in demand, the prices of commodities is bound to rise. The same is also true for credit. Now that we hope to see the signs of recovery, eventually banks and financial institutions will also raise their interest rates coinciding with rising consumer demand and increased consumer spending capacity.

Predicted End of Recession – GDP & Jobs

Historically the rise in jobs follows a rise in GDP. This has been more so in the face of the fact that the lag between the GDP bottoming out and then job losses has increased over the last 3 recessions. While the GDP of USA sat at a staggering 1.9% in 2008, it’s not all bad news. The Bureau Of Economic Analysis predict that the rate of US unemployment will rise from it’s current low of 9.8% to 9.3% in 2010.

The End of Recession – Increase In Productivity

A major indicator that production will soon be on the rise is the current profit margins of non-financial companies across the country. When the economic meltdown began the profit margins were at 10.5% and now stand at 10%. This is remarkable given the current business environment. While one of the reasons companies have been able to keep up these figures is owing to the fact that there have been close to 6.5 million job losses in this environment. None the less the inventory levels in factories are rising as more and more manufacturers reduce liquidating inventory and the trade deficit narrows. This should eventually lead to increased production levels and there by place upward pressure on demand for labor thereby increasing the demand for workers.

Predicted End of Recession – Increased Consumer Spending

Consumers have been very cautious off late as they have seen the US hit by one of the worst recessions ever. Owing to this the average American household has been saving as much as 4% as last reported. This kind of prudent savings may continue for a while, however will see a slight increase into 2010.

The End of Recession – Credit & Housing

In the wake of the economic crisis we have seen the mother of all credit contractions with it becoming increasingly difficult to obtain credit. Hopefully with the announcement of the end of the recession credit policy and lending criteria might ease up a little however be certain that the days of easy credit is over. With regard to housing prices, the BEA is divided as to when the housing market is going to hit its low. Some feel that it will be by the end of the third quarter of 2009 while some are of the opinion it will be in the fourth quarter and some feel that it will continue on to 2010. None the less economic predictions show that median home prices should rise in 2010.

These are just a few aspects of what the end of recession mean to the everyday investor and some of the things that can be expected to stem from the announcement of Ben Bernanke.

References:

1. Economists: End of Recesion 2009 – CNN Money
2. Barack Obama hails beginning of the end of US recession – The Telegraph
3. The Beginning of the End of the Recession? – Business Week