GDP Review: U.S., U.K., South Africa, Taiwan and Thailand

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Includes: EWT, EWU, EZA, THD
by: Econ Grapher

This week we look at GDP; revisions and releases. First up is a look at the revision to the US GDP results for Q4 2009, then there's the first revision to the UK GDP stats. Then we look to some of the fresh data coming from some emerging markets; we've got South Africa, Taiwan, and Thailand, all showing a reasonably strong bounce back from the recession.

At a high level we've basically got the developed nations (US, UK) recording growth on a quarterly basis, but still with poor growth on a year on year basis - and still with significant risks to the recovery and persistent structural problems.

On the other hand you've got emerging markets showing a strong bounce-back from the recession due to a number of drivers such as the global recovery in international trade, government spending, manufacturing, and to a lesser extent consumption. One thing to note though is that in every single case reported here the result beat consensus estimates...

1. US GDP - first revision
The US officially revised its Q4 GDP annualized quarterly growth rate up to 5.9% from 5.7% previously reported (against consensus estimates for no change at 5.7% with a range of 4.2% to 6.3%). On a quarter on quarter basis the rate was about 1.47%, and a year on year basis was 0.1%. So not a huge shift in the headline rate, but some of the details to note include that purchases of equipment and software grew the most in about a decade at 18.2% annualized. Also, inventories ended up making an even larger contribution to the growth rate, which shows that it's still very much at this point a temporary recovery. The question is, will it remain a temporary recovery or will it become a sustained, real recovery?


2. UK GDP - first revision
The UK saw its feeble recovery become slightly less feeble with the first revision to Q4 2009 GDP, the figure came in at +0.3% q/q instead of the original +0.1% (and against consensus estimates of +0.2%), placing it down -3.3% y/y. There's nothing much else to say on this one except that it's positive that the number was still positive, and that it beat consensus and previous, but then there's still the 2nd revision to come. It doesn't change the overall picture of a still very weak and struggling economy, where in a previous article I noted that at the moment the UK has high inflation and low economic growth - not a pretty picture.


3. South Africa GDP - growing recovery
First up in the fresh results from emerging markets is South Africa. The economic growth figure came in at an annualised rate of +3.2% (or 0.79% q/q), compared to the previous quarter's result of 0.9% (0.22% q/q) and consensus estimates for 2.6%. Year on year growth was still negative though at -1.63%. The recovery there is being lead by the manufacturing sector, and to a lesser extent mining, with consumer spending being slower to recover. So the recovery is underway in South Africa, but risks remain such as the large divide between the haves and have-nots, and an unemployment rate in excess of 20%.


4. Taiwan GDP - strong bounce back
Taiwan saw a continued strong bounce-back with 9.22% in Q4 2009 vs 2008, against consensus estimates of 7.1%. Looking at data from the Taiwan official stats site the figures were 4.23% growth quarter over quarter, and 8.48% growth year over year. The growth was driven by strong net exports, helped by a recovery in demand for things like cell phones and semiconductors. Domestic consumption also contributed to the strong figures. Taiwan is also no doubt aided by improving relations with the mainland, and progress made on lowering regulations for doing business in China...


5. Thailand GDP
The Thai economy grew 3.6% q/q in Q4, against forecasts for 1.8%, and previous quarter's result of 1.7%. On a year on year basis the $260 billion economy expanded 5.8% against an expected 4.0%. For the year of 2009 the economy shrank by -2.3%; see the chart below (a mix of IMF and Bank of Thailand stats). The Thai economy is benefiting from a global recovery in exports, and increased government spending, and adds to the picture of a strong recovery of economic growth in Asia.


Summary
To sum up the overall picture from a distance looks roughly like a synchronized global recovery. More and more economies are recording their first, second, or even third quarter of positive quarterly growth, while some are even starting to record positive annual growth (not confined to emerging markets like Thailand and China, the US just broke even on an annual basis).

But, to be sure, the devil is in the details. If you think about growth potential the emerging market economies are definitely proving to be better positioned for growth than developed markets. Already you're seeing not only strong growth and stronger recoveries, but also stronger drivers and fundamentals. The recovery in emerging markets is starting to happen for the right reasons, rather than short term things like inventory cycle and stimulus.

So the outlook is still for emerging markets to outperform developed markets on the economic growth front, as developed economies deal with structural problems. But one thing that needs repeating is that in this round we're seeing more results beat consensus than not. This says that either people are bad at forecasting the growth figures, or that people are being too pessimistic, and possibly that things are starting to get better.

Sources:
1. US Bureau of Economic Analysis www.bea.gov
2. UK Office for National Statistics
statistics.gov.uk
3. Statistics South Africa
www.statssa.gov.za
4. National Statistics Taiwan
eng.stat.gov.tw
5. Bank of Thailand
www.bot.or.th & IMF

Disclosure: No positions

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