The graph shows US profits after tax, with depreciation and inventory valuation adjustments, as a percentage of nominal Gross Domestic Product (GDP) from 1970 to 2002.
The graph shows that although profits tend to fall sharply during recessions in the US the most recent recession is an exception. Profits as a share of GDP peaked in 1997 falling from just under 7 per cent of GDP to around 4 per cent of GDP (a new low in the post-1970 period) before the recession started in 2001. Profits as a percentage of GDP have since recovered a little, though they remain low.
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The graph shows annual world GDP growth from 1970 to 2001, and Consensus forecasts for 2002 and 2003.
Over the past 30 years, world growth has averaged 3½ per cent. In 2001,
the world economy posted well-below average growth and is forecast by Consensus
to do so again in 2002, before picking up to around average growth in 2003.
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The top panel of the graph shows the federal funds target rate from 1970 to 2003. The bottom panel shows the Federal budget balance as a percentage of nominal GDP with a forecast for the budget deficit in 2003 sourced from the Office of Management and Budget.
The graph highlights the extent of the monetary and fiscal stimulus in the
US during the past two years. Monetary policy has been eased considerably, with
the federal funds rate having been reduced from 6.5 per cent in 2000 to the
current 40-year low of 1.25 per cent. At the same time, the fiscal balance has
quickly swung from a surplus of around 2.5 per cent of GDP in 2000 to a deficit
of around 1.5 per cent of GDP in 2002. A further widening in the fiscal deficit
is expected in 2003.
The graph shows the US dollar Trade Weighted Index (TWI) over the period 1980 to 2003. This index measures movements in the US dollar against the other major global currencies, which include the Canadian dollar, euro, Japanese yen, British pound, Swiss franc, Australian dollar and Swedish krona.
The TWI has traded a wide range over this period. Over the first half of the
1980s, it strengthened by around 52 per cent to reach an all time high of 144
in 1985. The TWI then weakened sharply in the second half of the 1980s, falling
to a level in 1988 that was 11 per cent below that seen in 1980. The TWI fell
slowly between 1988 and 1995, losing another 10 per cent of its value, to reach
an all time low in 1995, before appreciating by 43 per cent between 1995 and
early 2002 to a 17 year high. Since early 2002 the US TWI has fallen by around
12 per cent, unwinding 42 per cent of the appreciation seen between 1995 and
early 2002.
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The top panel of the graph shows the year-ended percentage change in real Australian GDP and domestic final demand, while the bottom panel shows the contribution of net exports to year-ended growth in real GDP.
The graph illustrates the strength of the domestic economy, with domestic
demand growing by just over 6 per cent through the year to the September quarter.
GDP, on the other hand, grew by a more modest 3.7 per cent over the same period,
as the combination of strong domestic demand and continued weakness in the global
economy led to net exports subtracting 3.1 percentage points from growth over
the year.
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This graph shows nominal business investment, as measured by the ABS Capital Expenditure survey, as a percentage of GDP from 1990 to 2002. Year-average forecasts for 2002/03 are based on estimates published in the Capital Expenditure survey, adjusted by 5-year average realisation ratios.
Business investment weakened considerably as a percentage of GDP in the period
1998 to 2001, reaching a similar level to that experienced during the early
1990s recession. However, the past year or so has seen a modest recovery in
business investment, with the latest estimates of firms investment plans for
2002/03 suggesting that this recovery will continue in the near term.
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