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Economy in Brief

Growth Slowdown- How Far? How Slow?
by Robert Brusca  December 22, 2011

GDP is slowing across the Euro-Area and globally. The chart at the top shows steady slowdowns in the US the UK and for EMU as Yr/Yr GDP growth rates diminish globally. The table shows the detail on quarterly rates of growth and Yr/Yr rates across the Euro-Area. Of the 12 countries in the table all but one has experienced a slowdown down in Yr/Yr growth for the two most recent consecutive quarters.

Finland, the exception, has two consecutive quarters of slowdown followed by a speed up in Q3. Italy has three consecutive slowdowns; Portugal and the UK and the US have more.

Portugal also has three quarters of Yr/Yr negative growth in a row. The UK, Spain, and Italy each have Yr/Yr growth below 1%.

Austria, Finland and Germany are the only nations in this sample with Yr/Yr GDP growth above 2%; Austria is at 3.5% Finland at 2.7% and Germany at 2.6%.

Still five countries in this sample have quarterly GDP growth rates of zero or less. Only Finland, the UK and Austria have quarterly rates above 2% SAAR; German is at 2%.

In short the slowing in the Zone is demonstrable. The haggling over how to save or if to save the Euro-Area is well-known and remains much-debated. While there are many opinions on this matter it is clear that the Zone itself is under pressure and that having no master plan is hurting.

The new ECB credit facility may help to alleviate some of this pressure. It is certainly something that is good for banks but it is far from clear how banks will use these new proceeds. If the Zone continues to slip into decline banks will probably not be lending very aggressively. In that case the ECB facility will have done a good job in helping to underpin a shaky banking sector that might have made the slowdown or recession worse. In all likelihood that is what we can expect because the Zone seems headed for a real recession.

EMU data continue to deteriorate. The Zone seems headed for a true recession with declines in EMU GDP and declines in the GDP of most member countries. With so many stresses already on members with austerity plans already in place on abroad front, if it likely that unless the Zone really gets its act together and forms a real –a true- fiscal union, we are on the verge of seeing members blown out of an EMU in which they no longer can survive.

While Europeans continue to say that we Americans do not understand their commitment to ‘The Zone’ despite its myriad problems, all I can say is this: if wishes were horses beggars would ride. Until Europe’s resolve shows itself in some real policy shift, until the strong come to rescue the weak, or come to give them some other form of comfort, it is not economically possible for Europe to stay together. It takes more than will; it takes effort, it takes sacrifice and it takes the hardest thing of all for a European: compromise.

Euro-Area And Main G-10 Countries GDP Results
  Quarter Over Quarter-SAAR Year/Year
GDP Q3-11 Q2-11 Q1-11 Q3-11 Q2-11 Q1-11 Q4-10
EMU 0.6% 0.7% 3.1% 1.4% 1.7% 2.4% 2.0%
Austria 2.5% 1.4% 3.6% 3.5% 4.0% 4.5% 3.4%
Belgium -0.5% 1.6% 3.5% 1.7% 2.2% 2.9% 2.1%
Finland 3.6% 0.2% 1.0% 2.7% 1.9% 4.9% 5.4%
France 1.6% -0.2% 3.8% 1.6% 1.6% 2.2% 1.4%
Germany 2.0% 1.1% 5.5% 2.6% 2.9% 4.6% 3.8%
Italy -0.6% 1.1% 0.4% 0.2% 0.7% 0.8% 1.6%
The Netherlands -1.0% 0.7% 3.0% 1.3% 1.8% 2.3% 2.0%
Portugal -2.3% -0.8% -2.4% -1.7% -1.0% -0.5% 1.0%
Spain 0.0% 0.6% 1.5% 0.8% 0.8% 0.9% 0.7%
UK 2.1% 0.0% 1.6% 0.5% 0.6% 1.8% 1.8%
US 1.8% 1.3% 0.4% 1.5% 1.6% 2.2% 3.1%
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