Latest recession news from Europe

The latest news from Europe on the progress of the recession is both good and bad. The good news is that in France and Germany the recession is over. The French and German economies both grew by 0.3 per cent in the second quarter of 2009. The bad news is that it drags on in some other parts of the eurozone. In the same period economic activity in the eurozone as a whole fell by 0.1 per cent.

I must say I deplore the sloppy way this information is imparted. This casual rounding of economic data makes it hard for us social scientists to follow events with sufficient accuracy. Let the authorities be more precise. Why not reveal that the French economy grew by 0.2713 per cent and the German by 0.3117 per cent? Meanwhile the eurozone economy as a whole fell by 0.0518 per cent. 

Indeed I wonder if it suffices to report these important matters in terms of old-fashioned nation states. Now that our masters in Brussels have deigned to sub-divide most of the members of the European Union into “regions”, it may be that the recession is actually not yet over throughout France. In some regions economic gloom may continue, while in others joy is unabated! Similarly with Germany.   

And perhaps we should look below the surface. For example, I gather that unemployment is not rising in the eastern part of Germany whereas it still is in the western part. It may be that in respect of certain industries output has increased, although continuing to fall in others. And of course, even though some results for the whole quarter may have been disappointing, perhaps an upturn in June failed to outweigh continued falls in April and May.

It’s all very perplexing for us aggregate-worshippers (or Keynesians, as we are sometimes known). Which aggregates should we be concentrating on? And should we care that nearly all these economic statistics are liable in due course to be revised upwards or downwards by at least one percentage point? I suppose we should, because the implication is that our initial reaction may ultimately turn out to be unjustified.

Would it be so intolerable for us to be expected to carry on with our lives simply not knowing whether “the recession is over” or not? Perhaps while the recession lingers on (or doesn’t) we should make the effort to get used to boring headlines of the following nature: Stop press economic news – overall output not much changed.

The Economist’s leader this week argues that “at economic turning points, one should track quarterly changes”. I would have thought exactly the opposite. How do they know they’re turning points? At times of uncertainty and volatility, it is rash to seize on small quarterly movements. I would hesitate to pronounce the recession over on the basis of these data. And I’d love to know how things are fundamentally any better, when we had a bubble and crash due to an excess of credit and consumption and an insufficiency of saving, and we are solving it by pursuing monetary and fiscal policies that encourage more credit and consumption and less saving. Are we in a new bubble already, or a bear rally?

One can’t help thinking that much of the crowing from France and Germany is because of Gordon Brown’s baseless assertion last year that Britain was ‘best placed’ the ride out the financial crisis. He obviously had no way of knowing this. It is not the economic significance of the is data that matters but their political importance to leaders trying to escape any blame for what happened last year. The result, as the noise about these figures shows, is a chronic short-termism. Next month, when our figures are up and there’s are down, the world will seem a much better place!

The Economist’s leader this week argues that “at economic turning points, one should track quarterly changes”. I would have thought exactly the opposite. How do they know they’re turning points? At times of uncertainty and volatility, it is rash to seize on small quarterly movements. I would hesitate to pronounce the recession over on the basis of these data. And I’d love to know how things are fundamentally any better, when we had a bubble and crash due to an excess of credit and consumption and an insufficiency of saving, and we are solving it by pursuing monetary and fiscal policies that encourage more credit and consumption and less saving. Are we in a new bubble already, or a bear rally?

One can’t help thinking that much of the crowing from France and Germany is because of Gordon Brown’s baseless assertion last year that Britain was ‘best placed’ the ride out the financial crisis. He obviously had no way of knowing this. It is not the economic significance of the is data that matters but their political importance to leaders trying to escape any blame for what happened last year. The result, as the noise about these figures shows, is a chronic short-termism. Next month, when our figures are up and there’s are down, the world will seem a much better place!

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