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09-07-2010, 11:18 PM #1
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Real Economic GDP Growth, U.S. vs Germany
Real Economic GDP Growth, U.S. vs Germany
Economics / Global Economy
Sep 07, 2010 - 01:42 PM
By: Paul_L_Kasriel
As Chart 1 shows, German real GDP growth, at an annualized rate of 9.0%, blew away U.S. growth at a paltry 1.6%. A number of factors might account for the stronger performance of the German in economy in the second quarter vs. the U.S. But one I want to concentrate on is the change in credit provided by private-sector financial institutions. These data are presented in Chart 2. I do not have oranges-to-oranges data to compare, but I do have oranges to tangerines data.
That is, for Germany, the change in credit is for all monetary financial institutions (MFI); for the U.S., it is for commercial banks. Notice that in the second quarter of this year, MFI-created credit soared at an annualized rate of 8.9%. In the U.S., commercial bank credit contracted at an annualized rate of 6.0%. In fact, ever since the fourth quarter of 2008, U.S. commercial bank credit has "underperformed" German MFI credit. As I said, the behavior of MFI credit or commercial bank credit is not the only factor accounting for stronger second-quarter German real GDP growth vs. the U.S., but I think it is an important factor.
by Paul Kasriel
Paul Kasriel is the recipient of the 2006 Lawrence R. Klein Award for Blue Chip Forecasting Accuracy
by Paul Kasriel
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