The top 10 economies of the world and the recession

January 23, 2009

United States

The United Stated with a GDP of $13.8 trillion is the world’s No.1. The US economy grew in the first quarter by 1 per cent. However, the recession has battered the economy. By June 2008, the economy fell into a recession. In the third quarter of 2008, the GDP shrunk by 0.5 per cent, the biggest fall since 2001. The 6.4 per cent fall in spending during Q3 on non-durable goods, like clothing and food, was the largest since 1950. About 2.6 million Americans lost their jobs in 2008, the worst since the end of World War II.

Japan

Japan is the world’s second largest economy with a GDP of $43.7 trillion. With a huge fall in exports, Japan has moved deeper into recession in the fourth quarter. Japan’s GDP has fallen at an annual rate of 0.4 percent from July to September 2008, marking the second consecutive quarter of negative growth. Japan’s previous recession was in 2001, after the dot-com bust in the United States. Japanese exports plunged a record 35 percent in December as the recession led to a fall in electronics and automobiles. Bank of Japan said the economy will shrink by 1.8 per cent this financial year.

China

China has steered ahead of Germany as the world’s third largest economy after the United States and Japan. It saw a GDP growth rate of 13 per cent in 2007. China revised the growth rate of its gross domestic product (GDP) for 2007 to 13 per cent from 11.9 per cent, the National Bureau of Statistics (NBS) said. The pace was the fastest since 1994 when the GDP expanded by 13.1 per cent, according to the NBS data. Final verification showed the GDP totaled $3.76 trillion. However, the recession has taken a toll on the economy. The growth in manufacturing has fallen sharply in the fourth quarter. The GDP growth in the fourth dropped to 6.8 per cent, pulling down the full year growth down to 9 per cent from 13 per cent in 2007.

Germany

Germany has been pushed to the 4th position after being ranked third for many years. Its GDP stands at $32.9 trillion. Falling exports saw the German economy’s GDP fall by half a percent in July, August and September, which was the second straight quarter of decline. The European economy saw its first recession in 15 years. Europe is facing the worst financial crisis since the great depression. The GDP in the 15 euro nations contracted by 0.2 per cent during August, September and October 2008.

United Kingdom

The fifth largest economy, United Kingdom fell by 0.5 per cent July and September. The GDP of the fifth largest economy stood at $27.2 trillion. The Economist Intelligence Unit in its forecast said the UK economy will “stagnate” during 2009. It said UK GDP growth will fall from 3.1 per cent in 2007, to one per cent in 2008 and it will contract 0.8 per cent in 2009. The economy shrank in the third quarter for the first time since 1992.

France

France is the 6th largest economy in the world with a GDP of $25.6 trillion. The French economy shrank by 0.3 percent in the second quarter of the year. However, the gross domestic product grew by 0.1 per cent in the third quarter of 2008. The International Monetary Fund has forecast a 0.5 percent fall of the French economy in 2009. President Nicolas Sarkozy unveiled a 26-billion-euro stimulus plan in December to fight the crisis.

Italy

Italy with a GDP of $21 trillion, is the 7th largest economy in the world. The Italian economy fell in the third quarter of 2008 for the second consecutive quarter. The GDP fell by 0.5 per cent on a quarter-ago basis, after a revised drop of 0.4 per cent in the second quarter.

Spain

The world’s 8th largest economy is Spain with a GDP of $14.2 trillion. Spain has been trapped under a recession for the first time in 15 years. Spain’s economy fell for the first time since 1993. Spain’s gross domestic product fell 0.2% in the third quarter from the second quarter, while it grew 0.9% from the third quarter a year earlier.

Canada

Canada is the 9th largest economy in the world with a GDP of $13.2 trillion. It is expected that Canada will see negative growth in the next two quarters. Canada’s unemployment rate is set to hit a high of 7.4 per cent in 2009. While the growth is 0.6 percent in 2008, there will be no growth this year, according to The Royal Bank of Canada (RBC).

Brazil

Brazil with a GDP of $13.1 trillion is the 10th largest economy in the world. Brazil’s economy has also been hit by the recession. Brazil’s industrial output fell by 6.2 per cent in November. This has been the fall since December 2001. Brazil’s unemployment rate dropped to its lowest point in seven years.

India

India with a GDP of $1.17 trillion is the world’s 12th largest economy. The Indian economy grew at 7.9 per cent in the first quarter ended June 2008, the slowest growth rate in three years. The growth rate of 7.9 per cent in the first quarter ended June 2008 is much lower than 9.2 per cent recorded in corresponding quarter last year. The economic growth further fell to 7.6 percent for the second quarter of this fiscal. The manufacturing sector has been badly hit by the slowdown. The growth rate in the manufacturing sector was recorded only 5 percent during July-September, 2008. The manufacturing sector had registered a growth rate of 9.2 percent during the same period last year. According to the National Council for Applied Economics Research (NCAER), India’s industrial growth will deteriorate further by next year.


World’s top 10 consumers of oil

July 25, 2008

1. United States

The United States of America is the single largest consumer of oil. It uses as much as 20.73 million barrels per day.

2. China

A fast growing China is the world’s second largest user of oil. The world’s most populous nation uses 6.534 million barrels per day.

3. Japan

Japan is the third largest consumer of oil. The Asian nation consumes 5.578 million barrels per day.

4. Germany

Germany is the fourth biggest consumer of oil in the world. It uses 2.650 million barrels per day.

5. Russia

Russia is the fifth largest consumer of oil. It uses 2.500 million barrels per day.

6. India

India is the sixth largest consumer of oil. It burns up 2.450 million barrels per day.

7. Canada

Canada is the world’s seventh largest consumer of oil. It uses 2.294 million barrels per day.

8. South Korea

South Korea is the world’s eighth largest consumer of oil. It uses up 2.149 million barrels of oil per day.

9. Brazil

Brazil is the ninth largest user of oil. It guzzles 2.100 million barrels per day

10. France

France is the world’s tenth largest consumer of oil. It devours 1.970 million barrels per day.


What you MUST know about Inflation

March 31, 2008

“Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair.” — Sam Ewing.

“Inflation and credit expansion, the preferred methods of present day government openhandedness, do not add anything to the amount of resources available. They make some people more prosperous, but only to the extent that they make others poorer.” – Ludwig von Mises.

Everyone is facing the brunt of rising prices. Prices of all essential commodities are rising not just in India but across the world due to a fall in supply. Inflation has spiralled all over the world. With India importing food items, it is only adding more woes to the people.

The Indian economy is also facing a slowdown. The markets have also shed huge gains — March 25 was a sort on anomaly — taking a cue from global meltdown. Industrial production has slowed down, further decelerating the economy. There were risks from turbulence on global financial markets and from rising oil, metals, and wheat and rice prices worldwide. The rise in Inflation is a matter that causes worry to any government. When inflation is on the rise, all of us should be concerned.

What is inflation?

“Inflation is the most regressive form of taxation because it hits the poor the most.”-Narendra Jadhav, Vice Chancellor, University of Pune.

 Inflation is a rise in the prices of a specific set of goods or services. In either case, it is measured as the percentage rate of change of a price index. Food prices are soaring . . . all essential items like vegetables, oil, milk, sugar are getting costlier. Rentals and real estate rates have almost doubled in just a few months in most cities. The real estate prices are at record highs making life miserable, especially for people who have migrated to cities for jobs.

Why inflation hurts us badly

“Inflation is bringing us true democracy. For the first time in history, luxuries and necessities are selling at the same price.” — Robert Orben.

Inflation hits you badly as prices are rising. You end up spending more money for things that you could buy for les earlier.

What you could buy for $ 100, a few years ago, would now cost you nearly double. As a result, your savings will come down. As prices rise, the purchasing power of money goes down too. So to fight inflation, you must always invest money wisely. When you invest money, you must be careful about the return on your investment. The return on your investment must always be higher than the rate of inflation. You may have got a good pay hike, but were you able to save the extra cash? Well, if inflation is high, you end up spending more money so in effect the hike makes little sense. A high inflation rate negates the salary hike you have received.

Inflation reduces the purchasing power of your money. It hits retired folk and people with fixed incomes very badly. Inflation destabilizes the economy as consumers and investors change their spending habits. People tend to spend less when prices are up as a result production slows down resulting in job losses as well. Inflation also affects the distribution of income. Lenders and borrowers are also hit. Experts say a little inflation is good for the economy. It keeps the economy active as the prices of goods keep changing. In the short term, it encourages spending and borrowing and also encourages long term investments.

How inflation hits you

“The first panacea for a misguided nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” — Ernest Hemingway.

Economists attribute inflation to a demand-pull theory. According to this, if there is a huge demand for products in all sectors, it results in a shortage of goods. Thus prices of commodities shoot up.

Another reason for inflation is the cost-push theory. It says that labor groups also trigger inflation. When wages for laborers’ are increased, producers raise the prices of products to make up for salary hike. The rising prices of food products, manufacturing products, and essential commodities push the inflation rate further.

Spiraling global crude oil prices have worsened the situation. Sometimes, banks create more liquidity by allowing more loans for people, giving them the purchasing power to buy more, as a result of which prices are driven up further. The demand-supply gap also drives inflation rates.

How is inflation calculated?

“Inflation is taxation without legislation.” Milton Friedman.

India uses the Wholesale Price Index to calculate and then decide the inflation rate in the economy. Most developed countries use the Consumer Price Index to calculate inflation. WPI is the index that is used to measure the change in the average price level of goods traded in wholesale market.

 In India, data on a total of 435 commodities’ prices is tracked through WPI which is an indicator of movement in prices of commodities in all trade and transactions.

CPI is a measure of a weighted average of prices of a specified set of goods and services purchased by consumers. It is a price index that tracks the prices of a specified basket of consumer goods and services, providing a measure of inflation.CPI are a fixed quantity price index and considered by some a cost of living index.

Many economists say that India must adopt CPI to calculate inflation as CPI measures the increase in price that a consumer will ultimately have to pay for. United States, the United Kingdom, Japan, France, Canada, Singapore and China use CPI to measure inflation.

WPI does not measure the exact price rise consumers will experience because; it is calculated at the wholesale level.

Another issue with WPI is that more than 100 out of the 435 commodities included in the Index are no longer important for consumers. Even commodities like livestock feed are considered to measure the WPI. In India, inflation is calculated on a weekly basis.

Types of inflation

“Inflation is like sin; every government denounces it and every government practices it.” Frederick Leith-Ross .

 There are different types of inflation:  

 Deflation: It refers to a general falling level of prices. 

 Disinflation: This is a decrease in the rate of inflation.  

Hyperinflation: When prices zoom and inflation goes out-of-control, it is called hyperinflation. 

 Stagflation: It is a combination of inflation, rising unemployment and stagnation in the economy.  

Reflation: This refers to move to hike prices to fight deflationary pressures.