The third quarter of 2008 ended yesterday, so in a few weeks we will start seeing the numbers for the growth of economies during that period. Since officially, the definition of a recession is two consecutive quarters of negative growth, we are going to analyze which are the likely candidates to fall officially under this category during the month of October. In Europe the first countries to fall into this category have been Denmark and Ireland, in this last case based on the growth rates of both the first and second quarters of 2008.
But let’s go by regions. The United States will not fall into a recession this month, even though it may be going through one already. The reason for this is that the second quarter of 2008 showed growth of 3.3% at an annualized rate. Therefore, if data for the third quarter shows a contraction of the economy, we would still have to wait to the fourth quarter to confirm two consecutive quarters of negative growth. Thus, officially, the US economy will not fall into a recession, if it idoes eventually fall into one, until January of 2009.
In Europe, meanwhile, there are several candidates that might fall into the category this month. France, with -1.2% in the second quarter (always at an annualized rate), Germany, with -2.0%, Italy, with -1.1%, the Netherlands, with -0.2%, or Sweden, with -0.1%, are all on the brink of a recession. If growth in the third quarter was negative, then they would confirm the two quarters of negative growth and would therefore be considered as going through a recession. Curiously, two of the countries that may see the strongest effects of the crisis will not fall into an offical recession, at least for the time being: Great Britain and Spain. With annualized growth rates of 0.2% and 0.4% in the second quarter, they would not qualify as falling into a recession until January, as in the case of the United States.
In Asia, Japan already showed negative growth in the second quarter (-3.0%), so a negative number for the third quarter would again put the country in a recession. But Japan is not alone in the region. Some of the smallest countries, especially those which are very export-oriented, may fall into this category, in particular Hong Kong and Singapore.
In the rest of the world there are still few other countries that face the danger of falling into a recession in the following month. These few may include New Zealand or Estonia. However, most emerging countries are still far away from a recession, with slowing growth rates that are, however, still high. But nobody is immune to growth deceleration in the industrial world, so we will keep on watching these countries over the next months,