Mixed Outlook for US, German Economies

28 November 2002

New figures for the USA and Germany give contrasting outlooks for the two nations’ economies.

• In the US, fears of a ‘double-dip’ recession were eased with better-than-expected results for the third quarter. The Commerce Department revealed that the economy grew at an annual rate of 4% in the three-month period, ahead of an earlier estimate of 3.1%

The government attributed the figure to greater accumulation of inventory by businesses and higher federal spending than anticipated.

In a further positive sign, the closely-watched consumer index of the Conference Board bounced back from its nine-year nadir of 79.6 in October to 84.1 this month.

There is still cause for caution, however. The Commerce Department also revealed that business spending fell 0.7%, the eighth monthly drop in a row, while economists are forecasting far slower fourth-quarter growth.

• There are far fewer positives in Germany, where the business sentiment barometer produced by the Ifo economics institute slipped for the sixth month in succession in November.

The index, based on a survey of 7000 executives, dropped from 87.7 to 87.3. Although the current conditions component achieved a rise (from 77.9 to 79.1), the overall figure was dragged down by an ominous slump in the future expectations measure, which sank from 97.9 to 95.8.

Data sourced from: The Wall Street Journal Online; additional content by WARC staff