Global Slowdown

Evidence that the financial turmoil in the United States and Europe is beginning to depress activity, not only in the developed world, but in the emerging economies as well, appears in reports of second quarter GDP. Increasingly these reports show the global economy in retreat. Second quarter growth in the whole Euro Area was only 0.2%, down from 0.8% in the first quarter. Germany, the largest economy in the Euro Area increased a mere 0.1% after having increased 1.3% in the first quarter. Both Spain and the Netherlands reported slower growth in the first quarter, Spain at 0.2%, down from 0.3% and the Netherlands at 0.1% down from 0.8% in the first quarter. The Flash estimates of GDP for the Euro Area, Germany, Spain and the Netherlands are show in the first chart.

Second quarter GDP reports also show the emerging markets of Eastern Europe slowing. The Baltic countries were a particularly bright spot in the emerging markets of Eastern Europe, but now Estonia, for one, is beginning to slow, growing 1.8% in the second quarter compared to 2.4% in the first quarter. Romania and the Czech Republic grew only 0.2% in the second quarter compared with 0.7% and 0.9%, respectively, in the first quarter. Hungary showed no growth in the second quarter. The Flash estimates of GDP for these countries are shown in the second chart.

Many of the emerging markets have yet to report second quarter results, however, we have some data from Asia. GDP is decelerating in China and South Korea. China's economy grew 2.1% in the second quarter compared with 2.3% in the first; while the comparable figures for South Korea's economy were 0.83% and 1.32%. GDP in Taiwan and Singapore actually declined in the second quarter after strong increases in the first quarter. Taiwan declined 0.83% in the second quarter after increasing 4.34% in the first quarter. The comparable figures for Singapore were even more dramatic, -1.63% and 6.20%. The growth rates for these countries are shown in the third chart.