The data are in for fourth quarter GDP figures from the OECD for its member nations. The thirty nations making up the group, headquartered in Paris, shrunk by 1.5% (annualised 6%) in the 4th quarter of 2008. The decline was similar across the EU and the G7 countries, comprising the USA, Japan, Germany, the UK, France, Italy and Canada. The final figures for Canada are awaited, but here are the figures for the other six.
USA: -0.96%
Japan: -3.3%
Germany: -2.1%
UK: -1.5%
France: -1.2%
Italy: -1.8%
What's immediately noticeable is the plight of the manufacturing nations. Germany and Japan are manufacturing based economies, with a very high proportion of their GDPs derived from exports of machinery, tools and cars, and yet they appear to have borne the brunt of the recession far greater than service based (and largely indebted) economies such as the USA & UK. Nobody is immune in this downturn.
Over the course of 2008, the GDP of the top six nations have contracted as follows.
USA-0.21%
Japan- 4.55%
Germany- 1.62%
UK- 1.7%
France- 0.91%
Italy- 2.19%
Across the OECD30, the aggregated GDP fell by 1.21%.
I'm not surprised - with the state of the recession in the US (people losing money through equity/investment holdings and more and more jobs being cut each day) people are tightening belts and restricting their consumption. Everything from automobiles to the dining/wine industry to tourism/leisure is being hit badly (look at say the price drops in Vegas for hotels in the last year, or the massive price slashes for collectible, investment wines such as classified growth Bordeaux). Not surprising that countries that rely heavily on manufactured goods are struggling.
ReplyDeleteTheir only comfort may be that they're not overly reliant on tourism (the Maldives for example is really taking a hit right now) or finance/real estate - what's happening in Dubai right now is frightening.
Thanks, Salil.
ReplyDeleteLiving in Europe has its advantages...you get to soak up some history, imbibe a bit of culture, have a weekend in Paris...but right now, it's scary as hell.
European economies are contracting much faster than the USA, as the figures above show. This may be just the beginning, though. Word's out that a second crisis is coming, with the looming spectre of meltdown in the East European economies- Ukraine, Poland, Romania, in particular.
The East Europeans borrowed to the hilt in foreign currencies such as the Euro & Swiss francs to finance new homes and lifestyle buys. Now, their currencies have collapsed and the size of those loans and mortgages have mushroomed. In trouble, therefore are the banks in Austria, Sweden, Germany, Begium and SocGen in France, who lent the Ukrainians and Poles all that money. The ratings agency Moodies recently warned of downgrades in creditworthiness of some Austrian and Swedish banks, leading to capitulation in their share prices.
Ukraine's economy contracted by a breath-taking 20% last year. More economies are due to follow suit. The ECB is nervous and Europe trembles in trepidation at what's coming.