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Then vs. Now

Is this recession really all that unusual?
CFO Staff, CFO Magazine
March 1, 2009

"Happy families are all alike," Tolstoy wrote. "Every unhappy family is unhappy in its own way." Does that hold true for economic cycles as well? We are certainly in an unhappy place at the moment, and while many pundits claim that this recession is unprecedented, it may not be as unusual as some believe. That, anyway, is one conclusion that McKinsey & Co. draws from its comparison of the current downturn with the four most recent recessions. The firm found that our present unhappy moment is in fact quite a bit like the previous four (1973–75, 1980–82, 1990, and 2001). What do past recessions tell us about leading and lagging indicators and related issues?

1) Which industry sector was the only leading indicator of a downturn across all five periods studied?
A. Energy
B. Consumer Staples
C. Consumer Discretionary
D. Financial

2) Which two sectors lagged the recovery in the four most recent recessions (current recession not included)?
A. IT & Industrial
B. Financial & Consumer Discretionary
C. Telecom & Health Care
D. Energy & Materials

3) Which of these sectors has shown the strongest contraction, on average, across the four previous recessions?
A. Energy
B. Materials
C. Telecom
D. Financial

4) Which has shown the most modest contractions?
A. Health Care
B. Utilities
C. IT
D. Consumer Staples

5) In the 2001 recession, which of the following industries posted the sharpest decline in total return to shareholders (TRS)?
A. Health Care
B. Consumer Discretionary
C. Industrials
D. Financial

6) Which posted the most modest decline in TRS?
A. Materials
B. Energy
C. Consumer Staples
D. Utilities

7) In the current recession, 9 of 10 sectors have thus far seen TRS drop by more than 20 percent. The only sector to avoid that steep a decline has been:
A. Health Care
B. Utilities
C. Consumer Staples
D. IT

8) In three of the four most recent recessions, recovery was first indicated by increased spending in the consumer-discretionary sector and which other?
A. IT
B. Energy
C. Financial
D. Materials


Answers: 1-C; 2-D; 3-B; 4-B; 5-A; 6-C; 7-C; 8-A




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