US Economy: Comparing Apples and Oranges
The Macro-Analysis Nr. 98/2003
By Eberhard Unger
[This article published on September 7, 2003 is translated abridged from the German on the World Wide Web, http://www.wallstreet-online.de/ws/news/news/main.php?&action=print.]
Since the publication of the GDP (gross domestic product) growth rates in the 2nd quarter 2003 on both sides of the Atlantic, the stock exchanges all over the world see themselves confirmed in their expectations: dramatic growth in the US - stagnation and recession in the euro-zone. The future is supposedly west of the "great pond"; everything in the East is encrusted in old structures. The US is again the economic locomotive according to this example. The market reactions run correspondingly... The currency markets could reach parity in several months. On Wall Street, the stocks are at yearly highs. The GDP growth in the US was calculated at 3.1% and in the euro-zone at 0% in relation to the first quarter. Doubts in the stock exchanges over this picture first arose in the last days. Comparing economic data on the GDP in the US and in the euro-zone is like comparing apples and oranges. The American data is calculated according to completely different methods than the German or the European data.
The US growth rate of 3.1% is annualized, that is projected on a yearly basis. According to German methods, a growth of 0.8% was shown. This figure is disappointing in view of the historically unparalleled stimulation measures of American monetary- and fiscal policy. Money market interests fell from 6.5% to 1.0%. Taxes were paid back in billions. The state has become indebted to an unparalleled extent (deficit spending). A deficit of $400 billion followed a budget surplus of $125 billion... With armament expenditures (Iraq war), the highest growth was posted since the Korean War at the beginning of the 50s. Such a push can hardly be repeated.
Investments in computer hard- and software rose 12% in 2003, the highest growth in 3 years... However this growth only occurred according to the hedonistic computing method (cf. Richebacher method) in which quality advances are counted as though they were sales growth... This calculating method amounts to more than 50% of the whole GDP growth. With the conventional calculation, a GDP growth of 0.42% or annualized 1.68% would be registered. A growth of 0.42% is hardly an "economic wonder". The structural problems are unsolved and slow down the recovery.
In conclusion, the economic recovery has in no way strengthened and gained scope. A supportive upswing is not in sight.