G-7 in Recession

December 24, 2008

Christmas Eve finds all parts of the G-7 — the United States, Euroland, Japan, Britain, and Canada — in recession. They are not alone. New Zealand, Hong Kong, Singapore, South Korea, Taiwan, Iceland, the Ukraine, Estonia and Latvia are among the bunch of other economies also in recession. With oil below $40, Russia appears a sure bet. Australia will have a hard time avoiding one. Among developing economies with normally high rates of growth, such are decelerating sharply enough to feel like a recession even if not technically qualifying. Chinese growth of 11.9% in 2007 slowed to 9.0% by 3Q08 and could be at 5.0% year-over-year around now.

Canadian GDP increased only 0.2% in the year to October, lowest since May 1992. The monthly drop of 0.1% was actually less than feared because of an unexpected 1.2% recovery in the energy sector. industrial production eased less than 0.05% on month, but wholesale trade slumped 2.7% and 4.9% between July and October amid collapsing automotive activity.

A factor that aggravated the U.S. Great Depression was a series of weather extremes like the dust bowls. Once again, one can say metaphorically that when it rains, it pours. Stormy U.S. weather in many regions from Seattle to Maine has snarled holiday travel and prevented procrastinators from getting to the stores, where prices have been slashed, and thereby rescuing a horribly weak holiday shopping season.

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