Donnerstag, 25. Juni 2009


One of the strange things about the current crisis is the observation that GDP decline in Germany and Japan is much sharper than in the US, even though the crisis originated in the US, and is to a large extent due to a drop in US external demand.

Sure, the obvious explanation is that "surplus countries" are hit by a decline in their foreign trade surplus, whereas America's GDP benefits from a drop in the deficit.

But the really interesting question: Why is America's deficit dropping so much? If the drop in US imports is due to a drop in overall demand, wouldn't it be reasonable to expect that demand for domestically made goods is also down sharply, and GDP is dropping right along with it?

According to US GDP statistics, the answer seems to lie first and foremost in the consumption of services: These account for 45 % of US GDP, and they were still growing at nearly 1 % yoy in Q1 (in real terms).

In particular, "medical services" (10 % of US GDP) were up 3 %, and "housing" (another 10 % of US GDP) was up 0.5 % (housing in this context refers to rental payments and imputed rent on owned property). The catch-all category "others" (a further 10 % of US GDP) also increased by 0.6 %. And the "residual", i.e. the unexplained remnants, accounted for a further 0.4 % improvement in overall service demand.

As for consumption of goods, "furniture and household equipment" was stable, in spite of the housing crash. "Nondurable goods" overall were down 3.5 %. Cars crashed by 20 %, but they only made up less than 4 % of GDP to begin with.

Based on these figures, it seems that demand for consumer products (with the exception of cars) has not exactly crashed. So apparently, the drop in imports has to be due to inventories and/or imports of investment goods (investments in "equipment and software" were down a massive 20 % yoy).

(Unfortunately, Germany's Destatis does not seem to publish a breakdown of private consumption, so we are unable to make an item-for-item comparison.)

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