Ding-Dong The Recession Is Dead!

Word is from over there on the West side of the pond we call the Atlantic Ocean that your Great Recession is coming to an end, to the point that the Federal Reserve is starting to move “back toward normal policy.” Well, it seems the same is true for Europe’s largest economy, Germany, as we learn today in the Frankfurter Rundschau: new data out from the Statistical Office there show that there was growth of 0.3% in the second quarter, even though 35 analysts surveyed by Reuters had earlier collectively counted on further GDP-shrinkage by about minus 0.3%.

In fact, that Office reports that there were signs that growth actually re-commenced already in this year’s first quarter, although the cumulative total for 2009 does stand now at minus 3.5% (and is still expected by the government and some leading economic institutes to come out at minus 6% for the year). Even better is the year-on-year comparison with 2008’s second quarter, which itself was minus 7.1%. (I’m assuming all these growth/shrinkage percentage figures are normalized to an annual basis.) Increased private and governmental consumption, as well as construction, get the main credit for the upturn – plus the singular fact that German imports have lately contracted even more than their exports, thus sharpening further the world-beating performance of that champion German export-surplus machine.

Still, you don’t have to be too much of a skeptic to ask “So what? What does this new, surprising, but small growth number really mean?” So the (uncredited) FR reporter turned to a handfull of economic analysts from leading banks and think-tanks to get their opinions. Analysts from Commerzbank and Unicredit (an international bank, Italian in origin) are very optimistic, stating for example that “The recession is over, and has reached its end earlier than everyone thought. . . . According to our calculations we will see a V-shaped recovery in the second half of this year.” Call me congenitally gloomy, but I find the remark from Jens-Oliver Niklasch, of the Landesbank Baden-W├╝rttemburg, to be rather more enlightening:

The question is, how enduring [this “end-of-recession”] is. Many problems we have not solved, the banking sector just like before is especially reliant upon the State’s debt-shield. As long as it is not clear that the banks’ capital base is robust, we cannot assume that the Crisis is past. Japan is a cautionary example here.

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