Recession of 2009/Addendum

National growth rates in OECD countries

GDP at constant market prices
% change on previous period

	2006	2007	2008		Q1 07	Q2 07	Q3 07	Q4 04		Q1 08	Q2 08	Q3 08	Q4 08		Q1 09	Q2 09
United States	2.8	2.0	1.1		0.0	1.2	1.6	0.0		0.2	0.7	-0.1	-1.6		-1.6[1]
Japan	2.0	2.4	-0.6		1.0	-0.3	0.4	1.0		0.3	-1.2	-0.4	-3.2		-3.3
Canada	3.1	2.7	0.5		1.0	1.0	0.6	0.2		-0.2	0.1	0.2	0.8		-1.4
United Kingdom	2.8	3.0	0.7		0.8	0.8	0.6	0.9		0.3	0.0	-0.7	-1.6		-2.4	-0.8
Germany	3.0	2.5	1.3		0.4	0.4	0.6	0.3		1.5	-0.5	-0.5	-2.1		-3.8
France	2.2	2.2	0.8		0.6	0.5	0.7	0.4		0.4	-0.3	0.1	-1.1		-1.2
Italy	2.0	1.6	-1.0		0.2	0.1	0.2	-0.3		0.3	-0.6	-0.7	-2.1		-2.4

Source: OECD, Main Economic Indicators - and national statistics for Q1 09.

Recent economic developments

2009, 1st quarter

World

World trade falls - the value of trade by the G7 countries is 23% below that of Q1 2008.

Protection grows World Bank reports 47 trade restrictions by 17 G20 countries [2]

Developing countries lose exports [3].

IMF lending resources to increase - US proposes tripling them [4]

G20 Finance Ministers pledge further action [5]

The United States

Rising unemployment - 7.6% in January, 8.1% February.

Record budget deficit - $1.2 trillion 2009 deficit forecast by the Congressional Budget Office [6]. (Government spending expected to rise to 23% of GDP [7])

Major fiscal stimulus - proposed by President-elect Obama in his speech of 8 January [8][9]

Congress approves stimulus package - American Recovery and Reinvestment Act(H.R. 1) - a $839 billion stimulus package [10]

Financial Stability Plan - Government launches a plan intended to restore confidence in the financial system (including mandatory stress tests for major banks) and to provide financial assistance households and businesses[11]

Fears of Trade War – America First Steel Act, Homeland Security Comm. approves bill requiring federal agencies to use U.S. steel for public works projects, (HR 5935) [12] [13]

Money supply increase Federal Reserve to increase the size of its balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. [14]

Washington's digression Outrage over AIG bonuses threatens to derail Obama's rescue plans [15]

Housing market bottoms out?. House sales rise by about 5% in February.

Public Private Partnership Investment Program announced [16] to purchase $1 trillion worth of toxic assets from banks.

Europe excluding UK

Industrial production falls - Eurozone index drops by 3.5% in January.

ECB Discount rate cut from 2.4% to 2% [17]

French industrial production plunges at an annual rate of 13% in January.

German output projected to fall by 2.5 percent in 2009[18].

Eastern Europe's economic crisis [19]

IMF's Hungary programme[20]

United Kingdom

Industrial production falls - output decreased by 5.3 per cent in the first quarter of 2009 compared with the previous quarter and fell 12.1 per cent against the first quarter of 2008[21].

Fiscal stimulus announced- the main elements being a temporary reduction of the rate of value-added tax from 17.5% to 15%, a bringing forward of £3 billion of capital investment, and a range of minor tax reductions. The resulting discretionary fiscal easing (1.4% of GDP in 2009) together with the much larger effects of the automatic stabilisers was expected to raise the fiscal deficit to 9% of GDP in 2009 and even higher in 2010.[22]. Plans that were put forward for the halving of the deficit within 4 years included an increase to 45% of income tax rates for earners of over £150,000 a year

Quantitative easing [23] and Asset protection [24][25]

Discount rate cut - from 2% to 1.0% [26].

IMF endorses policy IMF Deputy Managing Director says "There is no unique weakness in the UK economy, and we believe the measures taken ...will strengthen the economy over the medium term "[27].

Asia

China's growth rate falls [28]

Japan's exports halved - exports in January 2009 were 56% less than in January 2008 [29].

Japan's industrial production falls - in January to 10.0% lower than in the previous month and 30.8% below that of January 2008 .

Japan's IMF loan - of $100bn[30].

2009, 2nd quarter

World

Signs of recovery- OECD leading indicators show moves toward long-term trend for the economies of nearly all industrialised countries[31], and G8 Finance Ministers say "there are signs of stabilization in our economies, including a recovery of stock markets, a decline in interest rate spreads, improved business and consumer confidence, but the situation remains uncertain and significant risks remain to economic and financial stability."[32]

Record public debt- the IMF expects the public debt of the 10 leading economies to rise from 78% of GDP on 2007 to 114% in 2010, or $50,000 per person.

United States

Output fall moderates? Reports from the twelve Federal Reserve District Banks indicate that economic conditions remained weak or deteriorated further during the period from mid-April through May. However, five of the Districts noted that the downward trend is showing signs of moderating. Further, contacts from several Districts said that their expectations have improved, though they do not see a substantial increase in economic activity through the end of the year

Banks fail stress tests - of the 19 banks tested, it was found that ten of them need to raise a total of $74.6bn. Any who fail to raise their quota will come under increased government control.

10 banks repay Treasury loans - received under the Troubled Asset Relief Program.

Credit crunch eases The LIBOR three-month lending rates for the dollar fell below 1 per cent for the first time. The previous all-time low was 1 per cent in June 2003.

Mark to market rule eased for inactive markets to what an asset could fetch in an "orderly" transaction (not including distressed transactions or fire-sales)[33]

Europe except UK

ECB discount rate cut to 1 percent - the interest rate on the main refinancing operations of the Eurosystem be decreased by 25 basis points to 1.00%, from 13/05/09[34].

ECB quantitative easing starts - with plans to buy €60bn worth of bonds. [35]

Ireland's supplementary budget - a number of tax increases and public expenditure cuts designed to reduce the deficit to 10.75 per cent of GDP for 2009 [36].

United Kingdom

"Recession is over!" - according to Martin Weale of the National Institute for Economic and Social Research[37]

Purchasing managers are optimistic PMI index reaches 50.9 - 51.7 for services (50 means stable)[38].

More quantitative easing: Bank of England increases its Asset Purchase Programme by £50 bn to £125 bn [39]

Budget - broadly in line with pre-budget proposals (but with top tax rate raised to 50%)

Treasury forecasts 2010 upturn and debt of 75% of GDP- puts gdp growth at -3½ to -3¾ per cent for 2009 (in line with independent forecasts) and 1 to 1½ per cent for 2010 (at the upper end of the range of independent forecasts) and forecasts an increase in national debt to about 75 percent of gdp.

S&P outlook revised to negative but 'AAA/A-1+' rating remains [40] - assuming national debt to reach 100% of GDP by 2013 and bank rescues to cost £145bn (note lower IFS estimates [41]).

House prices rise - twice in 3 months [42]

Leading Indicators

Ratio to trend, amplitude adjusted, per cent
(long-term average = 100)
Growth cycle phases of the CLI are defined as follows: expansion (increase above 100), downturn (decrease above 100), slowdown (decrease below100), recovery (increase below 100).

	Japan	Italy	France	Germany	United States	United Kingdom	China	Russia
October 2008	96.3	96.6	97.0	94.9	95.7	97.2	95.1	96.4
November 2008	94.5	95.9	96.3	93.3	94.1	96.6	93.1	93.6
December 2008	92.6	95.9	96.1	91.7	92.6	96.3	92.1	90.6
January 2009	91.2	96.2	96.3	90.7	91.3	96.3	91.7	88.2
February 2009	90.2	96.3	96.7	90.3	90.9	96.3	92.6	87.0
March 2009	89.4	97.3	97.8	90.2	90.7	96.7	93.4	86.2
April 2009	88.7	98.8	99.0	91.0	91.2	97.5	94.6	86.2
May 2009	88.4	100.5	100.4	91.5	92.2	98.3	95.3	86.9
Change	↓	↑	↑	↑	↑	↑	↑	↑

Source: OECD Composite leading indicators [43]

Forecasts

Annual percentage growth in Gross Domestic Product

(forecasts are shown in italics)

Date	Source	Country	2007	2008	2009	2010	2011
30 March 2009	World Bank [44]	United States	2.0	1.1	-2.4	2.0
		Japan	2.1	-0.7	-5.3	1.3
		Euro area	2.6	0.7	-2.7	0.9
		China	12	9.0	6.5	7.3
		Developing	6.1	5.8	2.2	4.8
		World	3.7	3.1	-0.6	2.9
31 March 2009	OECD Economic Outlook [45]	United States		1.1	-4.0	0
		United Kingdom		0.7	-3.7	-0.2
		France		0.7	-3.3	-0.1
		Germany		1.0	-5.3	0.2
		Japan		-0.6	-6.6	-0.5
9 May 2009	Economist Poll [46]	United States			-2.9	1.4
		United Kingdom			-3.7	0.3
		France			-2.9	0.3
		Germany			-5.2	0.3
		Japan			-6.4	0.6
8 July 2009	International Monetary Fund [47]	United States	2.0	0.8	-3.8	0.6
		United Kingdom	3.0	0.7	-4.2	0.2
		France	2.1	0.3	-3.0	0.9
		Germany	2.5	1.3	-6.2	-0.6
		Japan	2.4	-0.7	-6.0	1.7'
		China	13	9	7.5	8.5
		World	3.8	3.1	-1.4	2.5