GDP’s “statistical recovery”

GDP Aug09.jpg

The blog is very interested to see the different outlooks being proposed by central bank heads. US Fed Chairman Ben Bernanke claimed Friday that the financial crisis was due to “panic”, rather than fundamental problems such as reckless lending. As a result, with the “panic” over, he now saw the potential for securing “a sustained economic recovery”.

But at the same meeting, European central bankers were more cautious, believing that the world economy still faced major problems:

• Germany’s Bundesbank President Axel Weber said it was “too early to say it won’t be a bumpy road ahead.”
• Whilst European Central Bank President Jean-Claude Trichet was “uneasy when I see that because we have some green shoots here and there, we are already saying, ‘Well after all we are close back to normal“.

The underlying issue is shown in the chart from, which shows “official” recessions in grey. And these are much shorter than the “real” recessions faced by industries such as chemicals. This is because the end of the destocking process produces a statistical recovery, as GDP rises in response to a renewal of underlying demand.

Thus the “official” 1980’s recession ended in 1982, and that of the 1990’s lasted just 6 months. Yet in reality, the chemical industry had to wait 3-4 years before a real recovery took place. And even the minor downturn of the early 2000’s was far shorter officially, than in reality.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

, , , , ,

Leave a Reply