Second-Quarter Real GDP Growth - Germany vs. the U.S.
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.
Chart 1
Chart 2
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Author: Paul Kasriel
Paul L. Kasriel
Director of Economic Research
The Northern Trust Company
Economic Research Department
Positive Economic Commentary
"The economics of what is, rather than what you might like it to be."
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Paul joined the economic research unit of The Northern Trust Company in 1986 as Vice President and Economist, being named Senior Vice President and Director of Economic Research in 2000. His economic and interest rate forecasts are used both internally and by clients. The accuracy of the Economic Research Department's forecasts has consistently been highly-ranked in the Blue Chip survey of about 50 forecasters over the years. To that point, Paul received the prestigious 2006 Lawrence R. Klein Award for having the most accurate economic forecast among the Blue Chip survey participants for the years 2002 through 2005. The accuracy of Paul's 2008 economic forecast was ranked in the top five of The Wall Street Journal survey panel of economists. In January 2009, The Wall Street Journal and Forbes cited Paul as one of the few who identified early on the formation of the housing bubble and foresaw the economic and financial market havoc that would ensue after the bubble inevitably burst. Through written commentaries containing his straightforward and often nonconsensus analysis of economic and financial market issues, Paul has developed a loyal following in the financial community. The Northern's economic website was listed as one of the top ten most interesting by The Wall Street Journal. Paul is the co-author of a book entitled Seven Indicators That Move Markets.
Paul began his career as a research economist at the Federal Reserve Bank of Chicago. He has taught courses in finance at the DePaul University Kellstadt Graduate School of Business and at the Northwestern University Kellogg Graduate School of Management. Paul serves on the Economic Advisory Committee of the American Bankers Association.
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