Recession of 2009/Addendum

Recent economic developments

2008 4th quarter

World

G20 leaders agree on need for fiscal stimulus [1]

The United States

Output falls - gdp falls at an annualised rate of 6.2%

Unemployment soars - the rate the highest for 14 years - 6.7% in November 2008[2].

Deflation - consumer prices fall by 1% in October [3]and 1.7% in November [4]

$800 billion support package [5]

Federal Reserve buys mortgage-backed securities - Bank promises to buy up to $500 billion worth of mortgage-backed securities guarantee by Fannie Mae and Freddie Mac and up to $100billion worth of their direct debt [6].

Quantitative easing - Fed's open market purchases raise base money (the Bank's balance sheet total) from $0.9 trillion to $2.2 trillion [7]

Record national debt; - 72.5% of GDP [8]

Europe except UK

Eurozone output falls - Euro area and EU27 GDP falls by 1.5% [9].

German output falls - GDP falls by 2.1%.

French output falls - GDP falls by 1.2%.

The United Kingdom

Output falls - gdp falls by 1.5% [10].

Budget stimulus - government proposes discretionary public expenditure of 1.1% of GDP [11][12]

National debt reaches 43.6% of GDP [13]

Asia

Recession in Japan GDP fell 3.3% from Q3 to Q4 2008 [14].

Australian economy shrinks 0.5% [15]

Developing countries in recession GDP probably fell by an average annualised rate of around 15% in Hong Kong, Singapore, South Korea and Taiwan [16]

2009, 1st quarter

World

G7 Finance Ministers endorse fiscal stimulus policy [17]

The United States

Rising unemployment - 7.6% in January, 8.1% February.

Record budget deficit - $1.2 trillion 2009 deficit forecast by the Congressional Budget Office [18]. (Government spending expected to rise to 23% of GDP [19])

Major fiscal stimulus - proposed by President-elect Obama in his speech of 8 January [20][21]

Congress approves stimulus package - American Recovery and Reinvestment Act(H.R. 1) - a $839 billion stimulus package [22]

Financial Stability Plan - Government launches a plan intended to restore confidence in the financial system (including mandatory stress tests for major banks) and to provide financial assistance households and businesses[23]

Fears of Trade War – America First Steel Act, Homeland Security Comm. approves bill requiring federal agencies to use U.S. steel for public works projects, (HR 5935) [24] [25]

Money supply increase Federal Reserve to increase the size of its balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. [26]

Washington's digression Outrage over AIG bonuses threatens to derail Obama's rescue plans [27]

Europe excluding UK

ECB Discount rate cut from 2.4% to 2% [28]

French industrial production plunges at an annual rate of 13% in January.

German output projected to fall by 2.5 percent in 2009[29].

Eastern Europe's economic crisis [30]

IMF's Hungary programme[31]

United Kingdom

Quantitative easing authorised[32]

Asset protection scheme[33]

Discount rate cut - from 2% to 1.0% [34].

IMF endorses UK policy IMF Deputy Managing Director says "There is no unique weakness in the UK economy, and we believe the measures taken ...will strengthen the economy over the medium term "[35].

Asia

China's falling growth rate [36]

Japan's exports halved - exports in January 2009 were 56% less than in January 2008 [37].

2009, 2nd quarter

World

World economy to shrink - according to World Bank report [38]

Developing countries lose exports [39].

IMF lending resources to increase - US proposes tripling them [40]

United Kingdom

Quantitative easing starts- Bank of England cuts its discount rate to 0.5% and announces £75 billion asset purchase under its Asset Purchase Scheme [41] . The beginning of its programme of quantitative easing [42].

Asia

China faces a difficult year[43]

Forecasts

Annual percentage growth in Gross Domestic Product

(forecasts are shown in italics)

Date	Source	Country	2007	2008	2009	2010	2011
22 December 2008	World Bank [44]	United States	2.0	1.4	-0.5	2.0
		Japan	2.1	0.5	-0.1	1.5
		Euro area	2.6	1.1	-0.6	1.6
		China	12	9.4	7.5	8.5
		Developing	6.1	5.0	2.9	4.7
		World	3.7	2.5	0.9	3.0
28 January 2009	International Monetary Fund [45]	United States	2.0	1.1	-1.6	1.6
		United Kingdom	3.0	0.7	-2.8	0.2
		France	2.2	0.8	-1.9	0.7
		Japan	2.4	-0.3	-2.6	0.6
		China	13	9	6.7	8
		World	5.2	3.4	0.5	3.0
7 March 2009	Economist Poll [46]	United States			-2.2	1.9
		United Kingdom			-2.6	0.5
		France			-1.7	0.7
		Germany			-2.5	0.8
		Japan			-3.2	0.8