Business Cycles 1974-1981 | 1981-1989 | 1989-1996 | 1997-2007 | 2007-2013 | 2013 to date
The 1989-1996 business cycle
The accompanying chart reveals the close correlation between the annual change in the SA Reserve Bank’s composite coincident indicator (the blue line) and the G7-countries’ industrial production cycle over the 1980s and early 1990s. For all intents and purposes, the SARB’s composite coincident indicator can be regarded as the reference business cycle for the SA economy. Its correlation with the G7-countries’ industrial production cycle over this period of tumultuous exogenous influences (socio-political unrest, the imposition of trade and financial sanctions, SA’s political transition, etc.) is remarkable. Amongst other, this close correlation hints to a strong underlying continuity in SA’s business cycle, which was not derailed by the dramatic exogenous influences on the economy over this period. The 1989-96 peak-to-peak business cycle spans the run-up to SA’s first full democratic elections (April 1994) and the economic upswing (1993-96) which transpired thereafter.
On the one hand, the tumultuous political changeover seems to have dictated a prolonged economic downturn over the period 1989 to 1993, followed by a post-election economic expansion. On the other hand, the continuity between the business cycles of the 1980s and the 1989-96 business cycle is striking, giving credence to the view that ordinary endogenous business cycle forces were at work, and thereby explaining the cycle. In reality, the truth is that both forces were at play. This experience only underwrites the fact that one should be careful to underestimate the ‘unceasing round of the business cycle’ (with apologies to Burns & Mitchell).
For a narrative of the 1989-96 peak-to-peak business cycle …