U.S. economy contracted an estimated 3.5% in 2020, worst drop since WW2

The U.S. economy contracted 3.5 per cent in 2020, the Commerce Department reported Thursday, the worst economic freeze since the end of the Second World War.

The report estimated that the nation's gross domestic product — its total output of goods and services — slowed sharply in the October-December quarter after a record 33.4 per cent surge in the July-September quarter. That gain had followed a record-shattering annual plunge of 31.4 per cent in the April-June quarter.

The economy grew at a four per cent annual rate in the final three months of 2020.

The report estimated that the nation's gross domestic product — its total output of goods and services — slowed sharply in the October-December quarter after a record 33.4 per cent surge in the July-September quarter. That gain had followed a record-shattering annual plunge of 31.4 per cent in the April-June quarter.

The economy grew at a four per cent annual rate in the final three months of 2020.

Read more at:U.S. economy contracted an estimated 3.5% in 2020, worst drop since WW2 | CBC News

The Netherlands: Connectedness of the Dutch Economy Leads to Lower GDP Growth Forecast

 In this blog written for IMF Country Focus, the IMF’s mission  brief for the Netherlands, Alfredo Cuevas, explains that this economic integration could signal a slower recovery for the country from the crisis.

The GDP growth forecasts for the Netherlands issued by the IMF in its April 2020 World Economic Outlook (WEO) surprised many, not only for the large negative 2020 number itself, but for it being weaker than some other leading European economies. Let me make some general considerations about orecasting amid today’s immense uncertainties, and then look at the Dutch
economy.

Economists often conceptualize macroeconomic variables, such as real GDP growth, as the sum of a predictable or systematic component and an unpredictable shock. We develop and estimate statistical models of the predictable part and use them to make forecasts.

Read more at: 
Connectedness of the Dutch Economy Leads to Lower GDP Growth Forecast

USA: GDP sinks 4.8% in the first quarter, biggest drop since 2008 and there is worse to come

The collapse in the U.S. economy caused by the coronavirus pandemic triggered the biggest drop in gross domestic product in the first quarter since 2008 in a...

Read more at: 
https://www.marketwatch.com/story/gdp-sinks-48-in-the-first-quarter---biggest-drop-since-2008-and-worst-is-yet-to-come-2020-04-29

USA - GDP : Trump's double-false claim about GDP

President Donald Trump told Fox Business Network the country reached a rate of growth last quarter that hadn't been seen in 14 years. That's false in two ways and correct in none.

TRUMP: "We just did 3.2 ... 3.2 is a number that they haven't hit in 14 years." — interview broadcast Wednesday.

THE FACTS: It's nowhere close to the best in 14 years, by any measure. The rise in the first quarter of 3.2% in the gross national product was only the best since last year. It was surpassed in the second and third quarters with rates of 4.2% and 3.4% respectively.

Perhaps he meant to say it was the best first-quarter growth in 14 years. But that's not right, either. It's the best in four years.

The economy grew by 3.3% in the first quarter of 2015. So President Barack Obama has a better first-quarter record than Trump to date

Read  more at: AP FACT CHECK: Trump's double-false claim about GDP

Trump - Tariffs: European Union releases 10-page list of potential targets for retaliatory tariffs on U.S. products - by David J. Lynch and Michael Birnbaum

The list offered the most detailed glimpse to date of the likely targets for E.U. action, including products selected for maximum political impact in the United States. Among them: bourbon, a specialty of Kentucky, Senate Majority Leader Mitch McConnell’s home state; cranberries, which are grown in House Speaker Paul D. Ryan’s native Wisconsin; orange juice from Florida; and tobacco from North Carolina.

 “It’s pretty clear they’re trying to wake up American legislators, who are the only ones in government who can influence the president on this issue,” said Chad Bown, a trade expert at the Peterson Institute for International Economics. Still, the European Union said its response to Trump’s tariffs is designed to conform with World Trade Organization

Note EU-Digest: it is high time the EU stops playing footsie with the US and takes their gloves off. There are much tougher ways to deal with the US when it comes to convincing their ego-maniac President.

Trump better take note that the adjusted GDP of the 28 EU member nations  is bigger than both China and the US, based on the traditional list of world's economic super powers.

The EU can do a lot of harm to the US economy if Donald Trump continues on this destructive route
  
Read : moreEuropean Union releases 10-page list of potential targets for retaliatory tariffs on U.S. products - The Washington Post

Brexit: Britain dips to bottom of G7 economic growth table

Brexit: Too Little, Too Late

Britain has fallen from the top to the bottom of the league of G7 leading economies in the year since the Brexit vote, with official data recently showing slower growth than previously thought.

The pound dropped as much as 0.7 per cent against the euro on the back of weaker-than-expected GDP figures, a report that London’s house prices fell for the first time in nine years, and higher levels of consumer debt.

But despite the poor economic data, Mark Carney hinted that interest rates were still likely to rise in November. “If the economy continues on the track that it’s been on, and all indications are that it is, in the relatively near term we can expect that interest rates would increase somewhat,” the Bank of England governor said recently..

Some economists who think the BoE will raise interest rates from 0.25 per cent to 0.5 per cent at its Monetary Policy Committee meeting in November were more cautious following  Recent data release. Alan Clarke, of Scotiabank, said: “I’m sticking to my call for a hike in November, but I’m much more nervous now than I was before this data release.”

Having been the fastest-growing economy in the G7 on the eve of the EU referendum, new figures from the Office for National Statistics in Britain showed UK growth below the US, Japan, Germany, France, Italy and Canada. 

EU-Digest

EU Economy: Every one of the EU's 28 member economies is growing simultaneously for the first time since 2007

QWuartz reports that the European Union is facing its biggest crisis since… well, since its last big crisis. The perpetually problematic union is threatening to come undone, with Britain in the process of quitting the bloc and numerous populist movements elsewhere also threatening to sever ties.

But economically speaking, the bloc is performing better than it has in a long while. For the first time since 2007, all 28 of the union’s member economies are growing at the same time, on an annual basis.

Inflation-adjusted GDP in the EU will rise 1.8% this year and next, according to the European Commission’s latest projections. This is expected to push unemployment across the region to its lowest rate since 2009. For its part, GDP in the euro zone has risen for 15 consecutive quarters.

This is not to say that Europe’s economy is thriving, which is readily apparent by how successfully populist politicians have been blaming Brussels for their countries’ apparent financial malaise.

The European Commission warns that the risks to its forecasts are “exceptionally large,” thanks to the unclear intentions of US president Donald Trump, high-stakes elections across Europe this year, and the ongoing Brexit negotiations.

If Trump follows through on pledges to spend big on infrastructure, it could provide a boost to the EU’s export-oriented members. But if he doubles down on his “America First” policy, it could harm transatlantic trade. Meanwhile, a messy Brexit, tighter monetary policy from the US Federal Reserve, and a shaky Chinese economy could all derail the European economy’s slow but steady recovery.

Pierre Moscovici, the European commissioner for economic and financial affairs, warned that the benefits of growth must be shared more widely—both between and within EU countries—for it to be appreciated by citizens. “With uncertainty at such high levels, it’s more important than ever that we use all policy tools to support growth,” he said. “Above all, we must ensure that its benefits are felt in all parts of the euro area and all segments of society.”

EU-Digest

Global Economics: Decoding the shift in global economic power

Much has been made of how there has been a substantial shift in the balance of economic power between the advanced capitalist economies (or the “North”) and some economies of the global South.

It is true that very recently the hype surrounding “emerging markets” has died down, as international capital flows have swung away from them and many of them have shown decelerating growth or even declines in income as global exports fall.

Nevertheless, the feeling persists that — in spite of a supposedly resurgent US economy — the advanced economies are generally in a process of relative decline, while the developing world in general and certain economies in particular have much better chances of future economic dynamism. And this process is generally seen to be the result of the forces of globalisation, which have enabled developing countries, especially some in Asia, to take advantage of newer and larger export markets and improved access to internationally mobile capital to increase their rates of economic expansion.

But how significant has this process actually been? In fact, there has definitely been some change over the past three and a half decades, but it has been more limited in time than is generally presumed.

The share of the advanced economies in global GDP in current US dollar prices, calculated at market exchange rates shows that the share of advanced economies declined from around 83 per cent in the late 1980s to around 60 per cent now, which is really quite a substantial decline.

However, the bulk of this change occurred in a relatively short period: the decade 2002 to 2012, when the share dropped from 80 per cent to 62 per cent.

The periods before and after have shown much less variation, and indeed, the share seems to have stabilised at around 61 per cent thereafter.

The dominant part of this shift is due to the increase in China’s share, which rose from around 3 per cent to more than 15 per cent.

Once again, this happened essentially during the decade after 2005, when the share of China in global GDP at market exchange rates jumped by more than ten percentage points. Indeed, the change in China’s share alone explains 87 per cent of the entire decline in the share of the advanced economies in the period 1980 to 2015.

Considering only the last decade, that is after 2005, the relative increase in China’s GDP accounts for a slightly lower proportion of the change, at 67 per cent — which is still hugely significant.

The change in shares of other regions provides some interesting insights. The Latin American region experienced a medium term decline in relative income share over the 1980s (the “lost decade”), recovered somewhat in the 1990s before declining once again in the late 1990s and early 2000s. The global commodity boom of 2003 onwards was associated with a revival in the region’s economic fortunes and the share of the region increased from 5 per cent in 2003 to more than 8 per cent in 2011, but thereafter it has stagnated and fallen with the unwinding of that boom.

The income share of the MENA region (Middle East and North Africa) appears to be very strongly driven by global oil prices, with sharp peaks in period of high oil prices and stagnation or decline otherwise, and over the entire period there has been a stagnation in income share rather than any increase.

An even more depressing story emerges for Sub Saharan Africa, which showed decline in income share for a prolonged period between 1980 and 2002, and subsequently a slight recovery (from 1.1 per cent in 2002 to around 2 per cent in 2012 and thereafter) that was still well below the share of more than 3 per cent in 1980. The only developing region that shows a clear increase is developing Asia, which in this chart excludes China to clarify the respective significance of both.

But the increase in the income share of this region (minus China) has been much less marked than that for China, and most of it occurred after 2002, as the income share rose from 3.5 per cent in 2002 to 6.4 per cent in 2015.

It is evident that in terms of increasing share of global GDP, India has been the most impressive performer over the past decade in particular, with its share increasing from 1.8 per cent in 2005 to 3 per cent in 2015.

Note, however, that this is still tiny in comparison to China, and indeed, just the increase in China’s share over that decade has been more than three times of India’s aggregate share. South Korea’s share has also increased, mostly over the 1980s and early 1990s, while Indonesia’s share increase occurred mostly during the commodity boom of the 2000s.

In terms of per capita GDP, however, the Indian performance looks much less impressive than those of the major Asian counterparts. Interestingly, even the Chinese experience appears not as sharply remarkable, although still hugely better than that of India.

Charts tracking the movements of per capita GDP, measured now in Purchasing Power Parity (PPP) exchange rates rather than market rates. There are numerous problems with the use of the PPP measure, but for current comparative purposes it does provide some kind of indicator.

This shows that by far the most impressive performance in terms of increasing per capita GDP has been in South Korea, followed by Malaysia. India shows the least improvement among these five economies, despite its apparently more rapid increase in terms of share of world GDP in the last decade.

Overall, therefore, while the world economy has changed over the past three decades, this change should not be exaggerated for most developing regions, or even for most countries in what is apparently the most dynamic region of Asia.

Read more: Decoding the shift in global economic power | Business Line