It had to end sometime. But we'd all rather that the nation's long run of very good economic luck had not come to such an abrupt halt.

Economic historians will record that America's longest period of economic prosperity ended sometime during the third quarter of 2001. The previous recession ended during the early spring of 1991, so the United States had enjoyed more than 10 years of uninterrupted economic growth. But now the best that we can reasonably hope is that we're in the middle of – not just at the beginning of – the current period of recession.

Prior to the terrorist attacks on the World Trade Center and the Pentagon, the U.S. economy was walking a precarious tightrope. Throughout the summer, manufacturers' new orders were falling, unemployment was rising, and retail sales were sluggish. But there were some positive signs as well. Home sales remained strong, interest rates were low, and consumer confidence had stabilized after a period of decline.

But after September 11, the economy couldn't possibly maintain its balance on the high wire. The devastating physical and psychological damage caused by the terrorist attacks made a recession unavoidable.

The outlook for 2002 hinges upon a host of intangibles almost too numerous and too amorphous to identify. To begin, we don't know whether September 11th was a dramatic and horrific one-time "statement" by Al-Qaeda and its supporters and sympathizers – or the beginning of a relentless campaign of terror against the Free World. Nevertheless, we offer our expectations for economic growth in the coming year in the box on this page.

It's important to note that the U.S. economy has not exactly crashed and burned. Despite the decline in third quarter Gross Domestic Product (GDP), the initial downturn was actually less severe than feared given the disruption that ensued in the immediate aftermath of the terrorist attacks. But the decline in GDP during the final 3 months of this year will almost surely be worse than the 0.4% recorded in the preliminary estimates for July-September.

And there's a general consensus developing among those who have outlined the "most likely" scenario for the year ahead – the U.S. economy won't grow much more during 2002 than it did in 2001. Which is to say, not much at all.

Following GDP growth of 4.1% during both 1999 and 2000, it now looks like the U.S. economy will be lucky to have expanded by 1.1% during 2001. This factors in declines for the final two quarters of the year (thus meeting the customary definition of a recessionary period), coming after a period of diminishing growth over the first half of 2001.

But with challenge, of course, comes opportunity. And even cash-strapped businesses recognize the fact that investment in new inventory control and distribution technology is still critically important to their long-term success. Well-managed firms are keenly aware from past experience that they can best serve and profit from improving future demand in their target markets only if they've made the proper investments during this "down" time.

Recessions do not last forever, and the current one will be a not-too-distant memory at this time next year. And although the recession of 2001-2002 is unlikely to let any business (save, perhaps, the odd defense equipment or antibiotic manufacturer) prosper, profitability (and market share improvement) is still eminently attainable for companies that are well-managed, focused – and maybe just a little bit lucky – in the year ahead.

Data Source: U.S. Department of Commerce