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Economy in Brief

Growth Rates in EMU Show Rather Equal Slowdown
by Robert Brusca  March 6, 2013

Declining profiles for GDP growth rates are all the rage in EMU and elsewhere. Of the fourteen countries listed in the table (both EMU and non-EMU) Yr/Yr growth rates are lower in Q4 than in Q3 for all but three of them; two of those, Greece and The Netherlands, are in EMU and both of those still have negative Year-over-year growth. Austria and Germany still post positive year-over-year growth rates of GDP in Q4 despite adhering to the slowdown trend.

The UK, Germany and France when plotted show a clear ongoing trend to slowdown. The trend plotted for Italy, Portugal, and Spain also shows a clear slowdown. But in the case of the Mediterranean countries, the slowdown is more severe in terms of the low level that the growth rates obtain the in the region. That result comes from a less pronounced peak rate of recovery growth rather than from a steeper slowdown as the recovery has faded and the euro-crisis has taken hold. Over the last four quarters the average growth slowdown Year-over-year for the group Austria, Germany and France is nearly identical to that for the grouping Italy, Portugal and Spain. While the average growth rate for Germany Austria and France has been 2.8 percentage points stronger than for the Mediterranean countries over that period.

The e-Zone crisis has jolted GDP more off track more of less equally for the 'haves' as well as the 'have-nots' over the past year preserving growth differentials in the center compared to the periphery.

But like all generalizations this is not true for every member of the respective groups.

One interesting trend is that France alone has posted stronger year-over-year growth acceleration than EMU for each quarter that year-over-year EMU growth has been decelerating (since Q2 2011). This is despite some clear and growing struggles in the French economy. Maybe the reason for France's past success is going to catch up to it.

Germany's deceleration performance showed more slowdown than the EMU over for the first four quarters that EMU growth was decelerating, but Germany has since equaled or surpassed the change in the EMU growth rate over the last three quarters. Over the past two quarters only Germany, France, Austria, Belgium and Portugal have out accelerated The EMU result.

Meanwhile Finland's year-over-year growth deceleration is worse than EMU's for two quarters running, as is Spain's, while Italy's is worse and been worse for eight quarters running.

But, moving back to growth rates from acceleration/deceleration trends, and setting aside the rather equal maltreatment of the crisis across the Zone, we find unsurprisingly that Greek GDP has fallen the most since EMU began to decelerate with GDP dropping by 11.3%. Portugal is next with GDP lower by 5.8%. Italy is next with GDP off by 3.2%. Spain follows Italy next with GDP lower by 2.2%. The Netherlands, a very trade dependent country, has seen its GDP drop by 1.8% since 2011Q2..

For the rest of the Zone the GDP drop has been small to non-existent. Finland and Belgium's GDP fell by 0.3% over these seven quarters. France's GDP was flat, Belgium's fell by 0.1%; Austria's rose by 0.1% and Germany's rose by 1.1%. For all of EMU the net drop was 0.9% The UK, outside the common currency zone, saw GDP up by 0.7%.

We see obviously greater pain where GDP has fallen the most, but GDP growth rates have been shaved across the Zone with much less variation than the variation in absolute growth rates themselves.

Still, there is not much momentum in the Zone, if we are to infer the quality of momentum from changes in rates of growth. But Germany has managed to maintain growth during this period when almost no other country was able to do that (Austria at 0.1% was the only other). Still, problems for the Zone lie ahead especially those of a political nature with the power to scramble economic forces. No EMU member in the table has a very impressive year-over-year rate of growth to build upon. We have to consider the Zone still under a great deal of pressure and without momentum on its side, implying that some outside source (or inside source) of stimulus would be welcome, though none is in sight or really expected.

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