The Great Recession of 2008-2009: Causes ... - Index of - IZA

5 From recession to recovery
5.1 Economic recovery only slowly taking hold
Towards the end of 2009, a variety of indicators showed that the worst of the global financial
crisis was over in most countries. Stock markets have recovered from their nadir that was
evident in March 2008 and also exhibit far less volatility than at the height of the crisis
(World Bank 2010). Third quarter figures for GDP did indicate that most OECD countries
technically exited recession (besides Greece, Hungary, Iceland, Spain and the UK). 43 At the
same time, one is even witnessing an incipient asset price boom. Later in 2009, trade and
industrial production statistics suggested that a recovery is underway. Figures on
manufacturing activity in China, Europe, the US, and other badly-hit countries indicate that
the global recovery was beginning to strengthen at the start of 2010. Most notably, US
industrial activity reached its highest level since August 2004.
However, growth figures for the last quarter of 2009 reveal that this exit from recession is not
as robust as first thought. In particular, growth in the European Union has slowed down (from
0.3% in 2009Q3 to 0.1% in 2009Q4). Growth in Czech Republic and Italy fell back into
negative territory, while Greece, Hungary, and Spain continued to contract (data for Iceland
not available). Expansion in the US and Japan appeared to gather pace, though some of this
has been argued to be driven by the ‘inventory effect’ (i.e. business have run down stocks and
have started replenishing their inventory), which will not continue to be an engine of growth
over coming quarters. 44
Looking at the recovery from a more comprehensive perspective reveals that despite the
return to positive economic growth late in 2009, most advanced economies are still in a
vulnerable situation, particularly when judged from the standpoint of workers’ welfare. As
reported in Table 9, 20 OECD countries have technically exited recession by the fourth
quarter of 2009 (out of 30 countries). The Czech Republic, Germany, Italy and Portugal grew
in 2009Q3 before growth stalled in the last quarter of 2009, reflecting the fragile nature of the
recovery.
43 See figures from the IMF’s World Economic Outlook Database, October 2009,
http://www.imf.org/external/pubs/ft/weo/2009/02/weodata/index.aspx.
44 See ‘Manufacturing surges back’, Financial Times Europe, Tuesday, February 2, 2010, and Economist
Intelligence Unit (EIU) ‘World economy: unsustainable recovery’, ViewsWire, January 20, 2010.
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