Back into growth

Written By: - Date published: 11:27 am, September 23rd, 2009 - 5 comments
Categories: economy - Tags:

The newly released figures show 0.1% growth in the June quarter. The March figure was also revised up to -0.8% (from -1.0%).

Here comes the sun? Not quite. 0.1% is pretty damn weak. It’s below population growth (0.25% per quarter) so, we’re still worse off per person. And we’re a long way below the economic peak reached in the December 2007 quarter. Seasonally-adjusted GDP was 2.8% below peak in the June quarter and 4.2% per person below the peak. We’ve got a long way to go to get back to that level.

Unemployment is still rising and will continue to rise for at least a year, while wages are stagnating and set to fall in real terms. It will be some time before ordinary people feel any benefit from the return to growth.

On top of that, a growing body of economists are predicting this is a w shaped recession, and we’re just on the little rise in the middle resulting from government stimulus and a temporary return of confidence to the international markets. The fundamental problems that caused the recession (commodity prices including oil, housing bubbles, toxic financial assets, trade imbalances) remain unresolved, there is trouble still to come for the US exchange rate, government balance sheets are stretched, and there are indicators of trouble ahead – like falling money supply in the US.

So, yay, the recession’s technically over. But don’t break out the champagne just yet.

5 comments on “Back into growth ”

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  1. So Bored 1
    23 September 2009 at 11:35 am

    Marty you are right that the fundamental problems are unresolved, that we have revived the cardiac arrested cash flow by allowing debt to be underwritten and refinanced by the guarantee of the public purse. Ultimately the toxic debt on the books of the worlds major financial institutions needs to be flushed out, which can only mean that it is repudiated or inflated away. Either way the system is bung and you and I will foot the bill.

    The more serious issue is that we are even talking about growth in the traditional context. Growth economics has pased its’ environmetal and sustainability use by date.

  2. Bright Red 2
    23 September 2009 at 11:48 am

    wow, look at the exchange rate go! http://nationalbank.co.nz/economics/exchange/nzdusd.aspx

    Nearly a cent in the last hour

    That’s on top of gaining a cent yesterday. The farmers will be having heart attacks.

  3. Bright Red 3
    23 September 2009 at 11:50 am

    Fonterra: “”Our hedging policy is designed to take out the volatility and provide as much certainty for our farmers as possible. But as a rule of thumb a 1 cent movement in the exchange rate realised over a year has an impact of about +/- 10 cents per kgMS in the Milk Price, with everything else being equal.'”

  4. burt 4
    23 September 2009 at 1:24 pm

    Time to put taxes up ! Can’t have people getting wealthy and not needing welfare before 2011….