A Mid Summers Night's Dream
From the desk of Gene Miller on Wed, 2006-08-02 21:38
My brothers and sisters at the WSJ.com surprisingly have fallen for that old chestnut which usually surfaces this time of year:
The U.S. and euro-zone economies are swapping places, at least for the second half of 2006. The growth rate in the traditional leader seems to be slowing from an already disappointing 2.5% annual rate in the second quarter, while it is accelerating in the traditional also-ran, to as high as 3%.
Turning to Eurostat for second-half comparisons stretching back to 1995, one finds the following GDP growth quarter on quarter:
The US economy outperformed the Eurozone economy 17 of the 22 quarters, the rest go to the Eurozone with one tie. On average the Eurozone quarterly economy has outperformed the US economy once every 5.5 quarters. In other words, every other year count on the Eurozone to outperform the US for 3 months and then dutifully trail again for 16-ish months.
Similar Eurostat data regarding the GDP growth for the same periods vs. a year previous:
In this instance, the US economy with stronger second-half growth 16 out of 20 quarters (incomplete data for 1995).
Showing our WSJ friends are human as well, when they step in it they step with both feet:
In large part, the Old Continent is enjoying a cyclical catch-up. The trend of euro-zone gross domestic product growth may be low, but it's probably higher than the 1.4% average rate of the past five years.
Sorry, over the past 5 years (2001-2005) the Eurozone economy has indeed ‘enjoyed’ and annual average growth rate of 1.4% in terms of GDP. This as opposed to the US annual average growth rate of 2.4%. At least per Eurostat data:
WSJ, keep your feet on the ground. Since 1996 the Eurozone has topped 3% GDP growth twice, 1999 and 2000. Eurostat GDP forecast growth for the Eurozone in 2006 and 2007, 2.1 and 1.8 percent respectively.
WSJ scammed
Submitted by mmatters on Sun, 2006-08-06 04:53.
From WSJ:
The growth rate in the traditional leader seems to be slowing from an already disappointing 2.5% annual rate in the second quarter, while it is accelerating in the traditional also-ran, to as high as 3%.
The evidence that economic growth is coming down to below 2.5% is scant. Prelim 2nd quarter GDP was dragged down by a big reduction in purchases by the federal government. The rest of the economy grew by 3%. Anyone who thinks the feds have somehow turned of the spending spigot permanently is seriously deluded.
Plus, there are two more revisions remaining to the 2Q figure. For about the past two years, the revisions have almost always been upward. 1Q06 went from 1.1% to a final 1.7%, and 2Q06 went from 4.8% to a final 5.6%. I would suggest that the final 2Q figure will be about 3.0%, and if I'm correct, the whole WSJ piece was a waste of time by an unnamed premature triumphalist.
Additionally, the PMI indices for manufacturing AND non-manufacturing still point to expansion.
Flabbergasted
Submitted by marcfrans on Wed, 2006-08-02 23:30.
Mr Miller provides a useful service by putting two citations from the WSJ in a longer-term context. However, it is not clear why he thinks that the WSJ is supposed to "have fallen for that old chestnut".
The two citations are factually correct. The eurozone is currently "enjoying a CYCLICAL catchup" and the "trend(rate)" of the eurozone has been lower than that of the USA over the past 15 years or so.
There is nothing in the two citations suggesting that the WSJ is not making a proper distinction between cyclical movements and the longer-term trend. Indeed, one would expect that the WSJ is well aware of the fact that the US economic growth rate is currently slowing to a cyclical level below the US long-term trend, and that the eurozone is currently accelerating to a higher cyclical level above its own long-term trend. One would also expect that the WSJ is aware that this 'convergence' is a temporary phenomenon.
Again, Mr Miller provides a useful context, but he is probably wrong in thinking that the WSJ has not kept its "feet on the ground" in this matter or on this particular subject. If one wanted to 'castigate' the WSJ for getting off the ground in 'cloud cuckooland', one would have to look into their naive 'libertarian' notions on immigration matters. It is there that they reveal to have insufficient understanding of the 'cultural' (and institutional) underpinnings of long-term economic growth and 'development'.