Example eInsight, Economics Update Bulletin, from May 09' ___________________
In This Issue >>
+ UK sharp decline
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Welcome ____________________________ Our regularly updated eInsight aims to summarise some of the most interesting developments and economic indicators, providing you with useful and timely reflections on the economy as it continues to evolve and respond to circumstances. We hope you find it interesting and welcome your comments. |
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UK sharp decline into recession >>
GDP figures show that the decline into recession has been sharper than the recessions of the 1970s, 80s or 90s. Due to a revision to the GDP estimates, data now shows that the UK economy has officially been in recession for a year, although the first quarter was marginal. The UK's economy has shrunk by the same amount as the equivalent point in the 80s recession but at a much sharper rate.
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Recession worse in Exporting economies >>
GDP figures for the first quarter of 2009 are now being released across the OECD nations, and some quite staggering declines in these economies are being observed. The data tells an interesting story - the recession is hitting the big exporters of manufacturing the worst. The first quarter of this year wiped away 3.8 per cent of the German economy, and 4 per cent of the Japanese, compared to 1.6 and 1.9 for the US and UK respectively.
The timing of the declines also tells a story - the big exporters of manufacturing entered recession before the service-based economies. This recession is far more similar to an '80s style recession than many realise - the decline into recession was driven far more by high commodity prices than by the banking crisis.
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The latest inflation figures show that the headline CPI rate has fallen this month to 2.3 per cent, down from a peak of 5.2 per cent last September, and within the targeted range of 1-3 per cent. The fear of possible deflation (which is already well underway on the RPI measure) remains, although on a month on month basis prices have actually risen for the past three months. This is evidence that the Banks' attempts to increase liquidity through quantitative easing and the Asset Purchase Facility may be working. Its latest survey of credit conditions makes for hopeful reading, showing a strong expectation in the market for an improvement in the supply of credit in the second quarter of 2009.
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Stock markets around the world bottomed at the beginning of March, and since then have been on a strong upward trajectory. The FTSE has risen 28 percent since its nadir, and the DOW is up 29 per cent. Other major international exchanges are showing similar upward trends. This bull market has not come on the back of a wider economic recovery, but is due to the slowing of the pace of decline. As mathematicians would say, the second derivative is positive!
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Do recessions get worse for each country simultaneously in recession? >>
Volterra research using a database of historic GDP for 17 major Western economies since 1871 has shown that there is a strong relationship between the number of economies simultaneously in recession and the size of the recession in each country. For every additional country in recession at the same time, the mean size of the GDP fall in any country in a single year increases by 0.25 per cent.
