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
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
Canada	3.1	2.7	0.5		1.0	1.0	0.6	0.2		-0.2	0.1	0.2	0.8
United Kingdom	2.8	3.0	0.7		0.8	0.8	0.6	0.9		0.3	0.0	-0.7	-1.6		-1.9
Germany	3.0	2.5	1.3		0.4	0.4	0.6	0.3		1.5	-0.5	-0.5	-2.1
France	2.2	2.2	0.8		0.6	0.5	0.7	0.4		0.4	-0.3	0.1	-1.1
Italy	2.0	1.6	-1.0		0.2	0.1	0.2	-0.3		0.3	-0.6	-0.7	-1.9

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

Recent economic developments

2009, 1st quarter

World

World trade falls - by 9% in 2008 according to the World Bank [2].

Protection grows World Bank reports 47 trade restrictions by 17 G20 countries [3]

Developing countries lose exports [4].

IMF lending resources to increase - US proposes tripling them [5]

G20 Finance Ministers pledge further action [6]

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 [7]. (Government spending expected to rise to 23% of GDP [8])

Major fiscal stimulus - proposed by President-elect Obama in his speech of 8 January [9][10]

Congress approves stimulus package - American Recovery and Reinvestment Act(H.R. 1) - a $839 billion stimulus package [11]

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[12]

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) [13] [14]

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. [15]

Washington's digression Outrage over AIG bonuses threatens to derail Obama's rescue plans [16]

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

Public Private Partnership Investment Program announced [17] 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% [18]

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

German output projected to fall by 2.5 percent in 2009[19].

Eastern Europe's economic crisis [20]

IMF's Hungary programme[21]

United Kingdom

Fiscal stimulus:a stimulus package was announced in the November Pre-Budget Report, 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 authorised[23]

Asset protection scheme[24]

Discount rate cut - from 2% to 1.0% [25].

IMF endorses UK 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 "[26].

Asia

China's falling growth rate [27]

Japan's exports halved - exports in January 2009 were 56% less than in January 2008 [28].

2009, 2nd quarter

United States

Banks fail stress tests The tests showed the estimated effect of a 3.3% decline in GDP in 2009 and an unemployment rates of 8.9% in 2009, and 10.3% in 2010. Of the 19 banks tested and 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

Europe except UK

Eurosystem

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[29]. Quantitative easing starts - with plans to buy €60bn worth of bonds. [30]

IRELAND

(temporary draft) Ireland’s economy is expected to contract by 7.75 per cent in 2009 as a combination of deteriorating domestic and external conditions weigh upon activity. In the recent supplementary budget, a number of revenue-raising measures and public expenditure cuts were implemented in order to limit the deterioration in the general government deficit to 10.75 per cent of GDP for 2009. In addition, to address the issue of asset quality in the banking system, the Government will establish on a statutory basis a National Asset Management Agency to which certain assets will be transferred from the banks. The purpose of this initiative will be to strengthen the banks’ balance sheets and achieve a sustained flow of credit to the economy.

United Kingdom

Consumer confidence falls to an all-time low [31].

More quantitative easing: Bank of England increases its Asset Purchase Programme by £50 Billion to £125 Billion [32]

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

Treasury forecasts 2010 upturn and 75% debt- 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.

Leading Indicators

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	90.0	96.6	96.8	90.0	90.5	96.3	92.1	86.3
March 2009	89.0	97.4	97.9	89.6	89.9	96.6	93.0	84.9

Source: OECD Composite leading indicators [33]

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 [34]	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 [35]	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
22 April 2009	International Monetary Fund [36]	United States	2.0	1.1	-2.8	0
		United Kingdom	3.0	0.7	-4.1	-0.4
		France	2.1	0.7	-3.0	0.4
		Germany	2.5	1.3	-5.6	-1.0
		Japan	2.4	-0.6	-6.2	0.5
		China	13	9	6.5	7.5
		World	3.8	2.1	-2.5	1.0
9 May 2009	Economist Poll [37]	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