US 4Q GDP Contracted by Most since 1982
US: The US’ economy shrank 3.8% in 4Q08, the second consecutive quarterly fall as well as the biggest decline since 1982, following a contraction of 0.5% in 3Q08. Although the fall was better than market expectation of 5.4%, all of exports, personal consumption expenditures, equipment and software, and residential fixed investment dropped. In the press statement, the Bureau of Economic Analysis emphasized that the ‘advance’ estimates are based on incomplete data and are subject to revisions while the 4Q08 ‘preliminary’ estimates, to be released on Feb 27, will be based on more comprehensive data.
GDP in Major Countries Around the World
| |
US |
UK |
Eurozone |
Japan |
Switzerland |
Australia |
New Zealand |
Canada |
| 1Q07 |
0.1% |
0.8% |
0.60% |
4.80% |
1% |
1.40% |
1.20% |
4.10% |
| 2Q07 |
4.8% |
0.9% |
0.30% |
-0.80% |
0.90% |
0.70% |
0.90% |
3.90% |
| 3Q07 |
4.8% |
0.8% |
0.60% |
1.90% |
0.90% |
1.10% |
0.70% |
2.30% |
| 4Q07 |
-0.2% |
0.6% |
0.40% |
2.10% |
1% |
0.90% |
0.80% |
0.80% |
| 1Q08 |
0.9% |
0.4% |
0.70% |
2.40% |
0.30% |
0.60% |
-0.30% |
-0.60% |
| 2Q08 |
2.8% |
0.0% |
-0.20% |
-3.70% |
0.30% |
0.40% |
-0.20% |
0.60% |
| 3Q08 |
-0.5% |
-0.6% |
-0.20% |
-1.80% |
0.00% |
0.10% |
-0.40% |
1.30% |
| 4Q08 |
-3.8% |
-1.5% |
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UK: GDP reading in the final quarter of 2008 showed the sharpest decline since 1980. Shrinking by 1.5% qoq in 4Q08 following a contraction of 0.6% in the previous quarter, Britain is confirmed to have entered recession for the first time since 1991.
Eurozone: Eurozone has been in recession since 2Q08. In the third quarter, GDP shrank 0.2% qoq s household spending and investment contracted, more than offsetting growth in government expenditure and exports. Economic growth remain weak in the coming few quarters with unemployment picking up quickly and manufacturing and services index pointing deeper to the south.
Japan: Japan's GDP contracted 1.85 in 3Q08, more than market initially expected as business and household activities constrained amid deep recession. Sine 2Q08, Japan has entered another recession after 2001 with the BoJ slashing interest rate to virtually 0% (0.3%) and companies cutting jobs and expenditures.
Switzerland: Aggressive rate cuts by the SNB might have helped Switzerland's economy from turning negative so far. However, judging from the sluggish growth in the previous quarters (3Q:0%, 2Q: +0.3%), we do not rule out the possibility that Switzerland will enter recession (technically) by the first half of 2009.
Australia: Despite the capability of maintaining non-negative growth, Australia's GDP growth has been declining for 4 straight quarters since 4Q07. In 3Q08, economy grew only by 0.1% qoq, the slowest growth in 8 years as households curbed spending.
New Zealand: New Zealand's GDP contracted for the third consecutive quarter in 3Q08, extending the nation's first recession in 10 years. RBNZ slashed interest rate by 150 bps to 3.5% in January after a 100 bps reduction a month ago in order to stimulate economy. The chairman said that global and domestic economic conditions have deteriorated more rapidly than originally estimated and hinted possibilities for further rate cuts.
Canada: Canada's economy grew more-than-expected by 1.3% in 3Q08. However, the trick was to offset decline in export by more severe contraction in import. Consumer spending was weak while residential construction expenditures showed a third consecutive decline in 3Q08.Concern on a dire result is not unreasonable as trading partners such as US and Europe are seeing deep recessions which will have great impact on Canada's export.
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