The Investment Bust Recession (aug 1, 1957 – apr 1, 1958)

Description:

Duration: Eight months
GDP decline: 3.7%
Peak unemployment rate: 7.4%
Reasons and causes:

The end of the Korean War unleashed a global investment boom marked by a surge in exports of U.S. capital goods.22 The Fed responded by tightening monetary policy as the inflation rate rose from 0.4% in March 1956 to 3.7% a year later.2119 Fiscal policy focused on limiting budget deficits produced a surplus of 0.7% of GDP in 1957.21 The 1957 Asian Flu pandemic killed 70,000 to 100,000 Americans in 1957, and industrial production slumped late that year and early in 1958.23 The dramatic drop in domestic demand and evolving consumer expectations led to the failure of the Ford Edsel, the beginning of the end for Detroit's auto industry dominance.24 The sharp worldwide recession contributed to a foreign trade deficit. The recession ended after policymakers eased fiscal and monetary constraints on growth.21

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