Tracking the movements of the overall economy can help in tracking your company sales by plotting year-over-year growth

The U.S. economy has had a long history of ups and downs, most notably in recent times from the Great Depression in 1929 to the Great Recession in 2007. In between those major economic disruptions, there have been an additional dozen official recessions. Even between recessions, the economy is always rising and falling in smaller waves. Tracking the movements of the overall economy can help in tracking your company sales. As the saying goes, a rising tide raises all boats. Similarly, a rising economy generally lifts sales.

It is difficult to see the pattern of business cycles using raw data. Raw data, either monthly or quarterly, is generally irregular when plotted, and is not very revealing. A more informative way to look at the data is to calculate and plot the year-over-year growth. Year-over-year growth, or the sum of the 12 most recent months of data divided by the sum of previous 12 months converted to a percent, reveals the underlying pressure from the business cycle.

Since 1948, there have been 11 recessions. Many of the official recessions have been relatively mild, with year-over- year growth remaining positive. Using 100 Years of Business Cycles to Predict your Company Sales The recent “Great Recession” dropped to ‑3.4% growth in 2009 and lasted 18 months in comparison to the Great Depression where growth fell to -13.1% and extended for 43 months. Since 1900, official recessions have occurred at approximately 10-year intervals (marked with red arrows), with a few others sprinkled in (black arrows).

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By Deborah DeWolf Allen, DeWolf Associates