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Monday, 17 August 2009

Japan out of recession

Like France and Germany, Japan has broken out of recession after the economy returned to growth in the second quarter. Gross domestic product grew 0.9 per cent quarter on quarter, which would be a health 3.7 per cent on an annualised basis.

Some of that was provided by Japanese government expenditure, because public investment expanded 8.1 per cent in the quarter, but exports were also robust, growing 6.3 per cent in the period and Japanese domestic consumption grew by 0.8 per cent.

So where were those exports going? Certainly not to the UK, where despite rolling the printing presses to the tune of 11% of GDP through quantitative easing, the economy remains in decline.

Should we expect a redefinition of recession or GDP growth?

4 comments:

The Bellman said...

Dear Alex,

A question. It takes two consecutive quarters of 'negative growth' in GDP before a country is officially in recession. So how come France, Germany and Japan can all declare themselves out of recession after only one month of positive GDP growth? Especially when 0.3% would appear to be well within the margain of error for a dwnward revision.

Is this just politics, like defining GDP in such a way to count debt-based consumption as a measure of 'productivity'?

Demetrius said...

When someone I know was put on traction in the hospital, they "grew" by nearly an inch, but in essence remained much the same. The condition did not go away either. QE etc. could be just another form of traction. It does not change the basic economic distortions or problems.

Alex said...

Bellman, you have a good point, albeit that Japan, France and Germany have shown growth quarter on quarter.

GDP could drop 5% in the 1st quarter of each year and grow by 1% in every other quarter of the year for 5 years (and thus drop 10% over 5 years), but the economy would never be in recession.

I don't write the rules.

harmonyfuture said...

If you took the view that an economy is basically a business, then you would need a standardised set of figures in order to make a realistic assessment of the health of that business, so:
1. Turnover - this could be expressed as GDP
2. Income - this could be expressed as income to Revenue
3. Borrowings - speaks for itself
4. Assets - the level of infrastructure within the economy.
5. Liabilities (Overheads) - unemployment, budget, pensions, investment commitments etc.

With these 5 figures we could all do like for like comparisons when assessing whether one economy is faring better than another.

Likewise we need to redefine the term 'recession'. With QE, massive debt levels, emerging markets and the plethora of other factors, recession is outdated as an indicator of the true health of an economy.