Forecasting is never an exact science, but there was also a large number of downward revisions as many erroneously talked up their original predictions. Having said this, measuring growth or otherwise a $14trn economy, in the case of the US, is hardly an exact science either…
The US economy grew at just 1% in the second quarter of this year, with an initial forecast of 1.3% simply far too bullish.
UK GDP grew by a rounding error of 0.2%; Japan’s economy even contracted, by 0.3%, though thankfully even forecasts for its contraction were over-egged, with 0.7% the predicted figure.
In Europe the picture gets worse, with the powerhouse that is Germany’s Q2 growth chipping in at just 0.1%. The eurozone as a whole rose by just 0.2% with one commentator writing that the eurozone was “saved” by the troubled economies of Spain (0.2% growth) and Italy (0.3%).
The standout winner of the Q2 GDP tournament was China that saw its economic growth ease to just a 9.5% rise compared to 9.7% in the previous quarter.
Even though these figures weren’t that unexpected, it is still no wonder there is constant talk of recession (US and even Germany), debates over the future of some currencies (the euro disappearing and the yen being revalued) and soundbites over how slow the recovery will be.
The good thing though is that economies and markets are largely disconnected, that markets look forwards not backwards and that fundamentals are stronger than either economies or markets are pricing in.
The second quarter’s reporting season is over now so such disappointing figures will hopefully mean that base effect can kick in and investors will be buoyed by healthy – or at least healthier – figures for the second half of the year.
