Wednesday, February 21, 2024

World GDP troughs too

As I mentioned yesterday, today I would show you what's been happening to world GDP.  These are my calculations, using national GDP data and weighting them by the percentage each country is in world GDP, using purchasing power parity (PPP).   It sounds a bit incestuous but believe me it works.  Both series in the chart show quarterly percentage change at annual rates.

Again, big regional/continental divergences in growth rates, with Europe negative in Q4, and the US strongly positive.  This divergence is because of fiscal policy, with the US expanding government spending with the "IRA" and Europe contracting spending because of budgetary crises.  Germany risks duplicating the UK's mistake of austerity after the GFC; and Germany is Europe's biggest economy.  Contracting government spending during a downturn doesn't balance the budget, it just drives the economy into deeper recession.

Because of structural weakness in China and foolish austerity in Europe, the economic recovery will be sluggish.





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