Posted by: Josh Lehner | June 11, 2010

International GDP Comparison

UPDATE: A more recent post updates both GDP and employment information through 2012 Q3.

Given the multi-speed global recovery taking place, one interesting topic of discussion is how are the various countries performing. The graph and table below illustrate the relative performance of many of the largest economies in the world since the beginning of 2008. For the graph, each country’s real GDP (inflation adjusted) is normalized to its 2008 Q1 value and is tracked relative to that value over the past two years.

As you can see, more export dependent economies, such as Japan and Germany, experienced larger declines in GDP than other major economies as international trade plummeted during the depths of the recession and consumers curbed their spending. Also interesting to note is the differing growth rates for each economy during the recovery. Brazil, after a sharp two quarter drop, has rebounded strongly, experiencing more of a V-shaped recovery. Canada, only 0.4 percent below its previous GDP peak level, is expected to surpass its previous peak during the current quarter, while the US is projected to do so, most likely, in the third quarter of this year.

One interesting item to note when looking over the different countries’ numbers is the effect deflation has on Japanese GDP figures. With media reports discussing price level changes (inflation, disinflation or even deflation) and their potential economic effects, the Japanese experience stands out from a nominal vs real GDP point of view. The first graph below illustrates the nominal and real GDP for the U.S. Notice that nominal GDP has grown faster than real GDP over the past decade as the U.S. has experienced inflation – by definition nominal values must grow faster than real values when price levels are increasing and the economy is expanding.

Now contrast the U.S. with Japan, where deflation has, more or less, persisted for much of the past decade. (Prices declined in 1999-2003, 2005 and 2009 while remaining unchanged in 2004 and 2007. Recently, on a monthly basis, Japan’s CPI has been negative year-over-year for the past 15 months through April 2010.) As seen in the graph below, Japan’s nominal GDP has grown less in the past decade than real GDP. The rebound in nominal GDP since 2009 Q1 has been mush less than that of real GDP as prices have declined.

This is simply an interesting observation based on the data. Most economists are not expecting the U.S. to experience outright deflation for a continued period of time (headline CPI for the U.S. was negative in 2009 overall, however on a monthly basis it has returned to the positive territory) or for the U.S. to undergo a Lost Decade(s) like Japan has.


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