A popular definition for a recession is a decline in a country’s gross domestic product for two or more consecutive quarters in a year. So far, that hasn’t happened in the latest economic downturn, but there is plenty of bad financial news around concerning gas prices, home values, and job losses.
How does the yearling market perform during a recession? Looking back at the four recessions in the last 38 years listed by the online encyclopedia Wikipedia, the answer is that business at sales of young horses doesn’t always follow the economic trend. But in all of the recessions, there was at least one year of downturn in the average price for yearlings sold at public auction in North America.
In 1973-75, the country was troubled by high oil prices and high government spending because of the Vietnam War. In two of those three years (1973 and 1975) the yearling average rose, and it also increased again in 1976. The 1974 average of $10,689 represented a 12.8% drop from the previous year’s figure of $12,255.
Oil prices also contributed to the recession of 1980-82. During the first two years of that downturn, the yearling average was on the upswing, growing to $29,683 and increasing again to $35,146. It fell to $32,991 in 1982 and bounced back the following year, when it reached $41,258.
Decreases in industrial production and manufacturing-trade sales were the culprits during the recession of 1990-91. The yearling average dropped in both of those years (to $29,377 and again to $26,233), and it fell again in 1992, before enjoying an increase in 1993.
The most recent recession came in 2001-2003, when the dot-com bubble collapsed and the country was rocked by the 9/11 terrorist attacks. The price for yearlings declined in 2001 and 2002, to $52,549 and again to $43,699. But it grew 10% to $52,821 in 2004.
The grimmest time for the Thoroughbred industry and its auction business period didn’t occur during one of the four recessions. It happened in the latter portion of the 1980s when there were changes in tax laws involving Thoroughbreds.