Fourth-Quarter Growth in the G-3

April 7, 2009

The final 4Q08 revised Euroland GDP data were released today.  Comparable U.S. and Japanese numbers already had been published.  The United States and Euroland had identical contractions of 6.3% at a seasonally adjusted annual rate, while Japanese GDP plunged by a much sharper 12.1% saar.  Net exports and business investment each accounted for 56% of Euroland’s contraction.  In the United States, personal consumption and business spending combined to account for about 90% of the drop, while net exports were responsible for virtually all of the decline in Japanese GDP.

In comparisons of GDP in the fourth quarter of 2008 to a year earlier, a clear ranking emerges, with U.S. negative growth of just 0.8% followed by declines of 1.5% in Euroland and 4.3% in Japan.  One of the more interesting comparisons involves on-year changes in government spending.  In a deep recession, one would like to see fiscal spending growth accelerate either by policy mid-course correction or via automatic stabilizers.  That happened in the United States but not Euroland or Japan.  Government spending rose4 3.2% in the year to 4Q08, up from 2.4% in the year to 4Q07.  In Euroland, public expenditures posted near identical increases of 2.2% in the year to 4Q07 and 2.3% in the year to 4Q08.  And in Japan, where monetary stimulus also lagged, government spending fell 0.6% in the year to 4Q08, and adverse swing of 2.7 percentage points from a 2.1% increase in the year to 4Q07.

First-quarter growth this year will be awful in all three cases, too.  We get our first look at the U.S. figures at the end of this month, while initial releases for Japan and Euroland arrive during May.

Copyright 2009 Larry Greenberg. All rights reserved.  No secondary distribution without express permission.



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