By: Dr. Mike Campbell
The health of an economy is usually measured at quarterly intervals and expressed as a quarterly (or full-year) projection of gross domestic product (GDP). A positive figure indicates growth whereas a negative figure tells us that the country’s economy is contracting. Two successive periods of growth is simply good news, but two successive periods of contraction is regarded as a (technical) recession. The qualifier “technical” really relates to how bad the figures are – two quarters of significant contraction constitutes a recession without any rider. In order to reduce the economic noise in an evaluation of a nation’s fortunes, the full-year GDP figure is used since longer-term trends are more easily picked up. We are in the season where the final quarter GDP figures for 2011 (and the full-year data) are coming in.
Germany is the engine of economic growth in Europe and its economy contracted by 0.2% in Q4 2011. Joining them in the economic sin-bin were Italy (-0.7%), Austria (-0.1%), Spain (-0.3%), Belgium (-0.2%) and the Netherlands (-0.7% from the Eurozone economies and the UK (-0.2%). Better not to talk of Greece which saw a 7% contraction in Q4 – a new record for poor economic performance in the bloc. However, Eurozone member, France, surprised analysts by putting on growth of 0.2% in Q4 2011.
As a whole, this means that Portugal, Belgium, Italy the Netherlands and Spain join Greece in a recession. Taking the Eurozone as a whole, Q4 2011 saw a contraction of 0.3%. By comparison, the USA managed 0.7% growth in Q4, but Japan contracted by 0.6%.
However, the joy of statistics is that they will support a multitude of interpretations and the full-year picture is brighter. Germany saw full-year growth of 3% and France enjoyed 1.7%. Italy grew by 0.4%; the Netherlands by 1.3%; and Austria by 1.2%. As a whole, the Eurozone grew by 1.5% over what was clearly a troubled year of sovereign debt worries.