One of the remarkable features of the current economic distress that began in late 2007/early 2008 is the extent to which the initial collapse was common across economies (including the U.S.) in both timing and severity. What is not common is the path of recovery as the following analysis shows. The U.S. now looks to be in good shape compared to many of the E.U. economies…most of which have slipped back into negative growth. For the E.U. as a whole it is the second consecutive quarter of decline in aggregate real output. The business cycle dating committee of the Center for Economic Policy Research –CEPR- has declared that the Eurozone Economy slipped back into recession beginning in the 3rd quarter of 2011. Oue analysis focuses on the largest European economies including the U.K.
E.U. Growth Slows Compared to the U.S.
Many of the economies in the EU continue a decline in GDP that started in late 2011. These economies reached a nadir about 6 quarters after the recession began in 2008, then grew for about 6 quarters, stagnated, and have been in various rates of decline for 6 quarters or so. Moreover, none of the countries in the EU in the graph shown below has come back to its 2008 peak, except Germany. Indeed, the only positive signs are the Germany continues to grow and the U.K. has turned up a bit. It is far too early to suggest a U.K. turnaround given that they remain well below their previous peak.
Consumption continues to collapse in all but Germany and France where it has remained stagnant. More alarming is the complete collapse in capital formation. Only the U.K. shows a possible recovery in capital formation after a dramatic decline. Even more dramatic is the decline in residential capital formation. The total collapse in Spain is well understood but, except for Germany, it is remarkably weak everywhere.
One of the few bits of encouraging data is the recovery of exports in several of the most impacted economies. Spain in particular has had robust export growth as have Germany and the Netherlands. Imports have recovered in Germany, the Netherlands, and France.