Facebook Blogging

Edward Hugh has a lively and enjoyable Facebook community where he publishes frequent breaking news economics links and short updates. If you would like to receive these updates on a regular basis and join the debate please invite Edward as a friend by clicking the Facebook link at the top of the right sidebar.

Friday, May 9, 2008

Latvia GDP 2008 Q1 GDP Flash Estimate

Latvijas Statistika published the following 2008 Q1 GDP flash estimate on its website this morning:

In accordance with flash estimate published the CSB, which is based on currently available statistical data and econometric models, the Gross Domestic Product (GDP) increased by 3.6%, compared to first quarter of 2007.

More precise data and more extenive analysis of first quarter 2008 GDP will be published on June 9, 2008. In the meantime we are rather left guessing again. First of here is the year on year chart:

If we look at the rate of decline indicated by the slope of the line over the last three quarters one thing is clear: this is now that long feared "hard landing". I think though that had already been clear for some time from the data we had been seeing from retail sales and industrial output.

I will try and put something more extensive up either later this afternoon or early tomorrow, but if we take into account that quarter on quarter growth over the 3 previous quarters had been at a rate of 2.4, 2.5 and 1.2% respectively, and that this added up amounts to 6.1% growth in 3 quarters it is pretty clear that we must have seen quite a strong contraction (in seasonally adjusted terms, since the other numbers are seasonally adjusted) in Q1 2008. More later.


What a chump I am sometimes. Basically the easiest thing to miss is the blindingly obvious. Now what we do know - according to the flash estimate, which can be revised of course, but as one commenter (see below) astutely notices normally the revisions have been downwards of late - we do "know" that GDP probably rose by 3.6% year on year, and we do know that GDP in Q1 2007 was 2058.156 million lats (i just looked it up at Lavijas statistikas). So if we increase this number by 3.6% we get 2132.249 million lats (since I just did the calculation), and that puts us at a level lying below the 2,192.109 million lats of Q2 2007 and below the 2,240.902 million lats of Q3 2007 (all at constant, inflation adjusted, prices).

That is to say that - in constant price terms - Latvian GDP hit a peak at some point bewteen Q2 and Q3 2007 (lets say August 2007) and since that time has been steadily CONTRACTING. Now I know there are probably hundreds of different ways of skinning a chicken, and of course you can read data everywhichway you want to, but as far as I am concerned there is no getting away from it, on any reasonable criterion the Latvian economy is now in recession, and has been since the middle of last year, and as a result I am now more than happy to stick with my original recession call which I made when I first had site of the detailed Q4 2007 data.

As I say the Latvian economy is contracting, and I see no sign (or jutification for thinking) that it is going to start expanding again in the immediate future. So I really don't see where people are getting all those positive GDP growth numbers for 2008 from at this point, I really don't.

No comments: