Week 44, 2012: Relative GDP Recovery

Summary: As the election in the United States approaches, many will be concentrating on the perceived performance of the economy.  Compared to most of the G7 economies, US GDP recovery since the recession looks strong.

What does the chart show? The chart shows an index of Gross Domestic Product (GDP), often considered the main measure of the general health of an economy, for each of the G7 economies. The index is calculated using constant prices in the relevant local currency, and adjusted so that its value on the eve of the global recession (the fourth quarter of 2007) is equal to 100.  This means that any value above 100 represents a higher real level of national output than before the recession hit.

Why is the chart interesting? There seems to be a misconception in the United States that their economy is faltering.  While their annual GDP growth may be below the long-term average, they are still recovering from a major global economic shock, and are doing so faster than many of the other top economies in the world.  Four out of the seven G7 economies have not yet recovered to their pre-recession level of output, and Italy (and to a lesser extent, the UK) has barely shown any signs of recovery at all!

One of the real problems the US economy is facing, though, is stubborn unemployment despite the overall recovery.  This may prove to be decisive in the election next week, as key employment figures are released this Friday.  If, as many suspect, they show any growth in unemployment (even as part of a temporary blip), this may be bad news for the incumbent.