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Weekly Commentary
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Through the top
Mon, Jan 14 2008, 06:22 GMT
by Westpac Institutional Bank Team
In 2008, perhaps the biggest question facing economists is how the global economy will fare in the aftermath of the US sub-prime mortgage debacle.
In the US itself, the first signs of a broader economic slowdown have emerged. There was no employment growth in Q4 and the unemployment rate rose to 5%, from 4.7% in December. The UK economy appears in some trouble, but the rest of the world has not batted an eyelid.
Is it just a matter of time, or can Asia and Europe successfully "decouple" from the American economic cycle? We think they can. No doubt the US slowdown will affect Asia and Europe to some extent. After all, the American economy is twice as big as any other. But the effect will be smaller than in previous cycles. China is less export-dependent than some may think – actually only 10% of GDP by value-added is exports. Much of the Chinese economic miracle has been home-grown, based on the emergence of a middle class. And now India is following China down the path of economic transformation, with growth rates approaching 9%. Last year developing countries accounted for 50% of world economic activity and threequarters of the economic growth. America is still important, but not as important as it once was.
Last week's commodity report illustrated how New Zealand is benefiting immensely from the changing world economy. Commodity prices finished the year 31% higher than they started.
Published on Mon, Jan 14 2008, 06:24 GMT
Archive
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Published On Mon, Nov 2 2009, 05:54 GMT - On tenterhooks
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Published On Mon, Oct 5 2009, 08:06 GMT
Westpac Institutional Bank
| ABN 33 007 457 14
http://www.westpac.co.nz | natalie_denne@westpac.co.nz
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