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18 December 2008

An extract from Michael Knox's (ABN Amro) Economic Strategy: A Growth Recession

With growth of only 0.1% on a seasonally adjusted basis for the quarter to September 2008, Australia is already in what economists call a “growth recession”. A growth recession is when output is still positive but is so slow that unemployment rises. Our outlook for calendar 2009 is that Australia will remain in a growth recession. We think GDP in 2009 will rise by only 0.7%.

This is slightly less than the market consensus. On the other hand, we think that inflation in Australia in 2009 will be 3.2%. This is slightly higher than market consensus. The outlook for growth and inflation in Australia are much better than in the US. The US in 2009 will be in deep recession. US GDP in 2009 should fall by 1.8%. The US CPI should fall by 1.5%.

As well as recession, the US will experience actual deflation in calendar 2009. The fall in the price level by 1.5% means that even with a Fed Funds rate near zero, the real Fed Funds rate will still be a positive 1.5%. The Fed has reached the limit at which interest rates can provide new stimulus to the US economy.

Source: Michael Knox's (ABN Amro) Economic Strategy: A Growth Recession

Yours in property

1 comment:

commercial real estate said...

thanks for sharing this information...