Description of Graphs for Speech by Malcolm Edey, Assistant Governor (Economic)
‘Economic Performance and Issues in 2003’
5 March 2003
Graph 1: G7 GDP
The graph shows quarterly and year-ended percentage change in Gross Domestic Product (GDP) for the Group of Seven Countries (G7) economies between 1990 and 2002.
At the end of 2001, year-ended growth in GDP dipped below zero for the first time since the early 1980s. Over 2002, growth recovered to just over 2 per cent. While this is an improvement on 2001, it is still below the pace recorded during most of the 1990s.
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Graph 2: United States - Monetary and Fiscal Policy
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.
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Graph 3: United States
This two panel graph compares US GDP outcomes for the four years around the three most recent US recessions in the top panel and makes the same comparison for employment outcomes in the bottom panel.
The top panel shows that during the current recovery GDP fell less from its peak than in the two previous recession periods and also currently remains higher relative to its peak than GDP was during the previous periods. Consensus forecasts are also included and suggest that this will continue.
The bottom panel shows that employment outcomes (relative to the peak) are similar in the current recovery period to the outcomes in the 1990s recovery and significantly better, at this stage of the recovery, than in the early 1980s recovery period.
Graph 4: Non-Japan Asia - Production and Exports
The graph shows an index of aggregate production and an index of exports for the Non-Japan Asia region, from the period from 1997 to 2002.
It shows that production in the region grew steadily until the middle of 2000, when it flattened out, before again growing strongly throughout 2002. Exports declined from mid-2000, before rising through most of 2002 to reach levels slightly higher than those attained in mid-2000.
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Graph 5: Non-Japan Asia - Industrial Production
The graph shows indexes of industrial production for each of ten countries in the Non-Japan Asian region from 1999 to 2003.
The left-hand side panel shows the countries where industrial production performance has been strongest recently (China, Korea, India, Indonesia, Malaysia and Thailand). In the other countries (Hong Kong, Philippines, Singapore and Taiwan) industrial production outcomes have recently been weaker.
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Graph 6: Exports and Imports
The graph shows year-ended growth in export and import volumes, together with the overall contribution to year-ended GDP growth from net exports.
It highlights the substantial drag on GDP growth currently coming from net exports as a result of weak export growth and the strong growth in imports.
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Graph 7: Corporate Interest Payments
The graph shows the level of corporate interest payments as a per cent of corporate gross operating surplus for the period 1985 to 2002.
It shows that interest payments are close to their historical lows as a share of profits; they are currently a little more than 15 per cent of profits, which compares with more than 45 per cent for much of the late 1980s.
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Graph 8: Capital Expenditure by Asset
The graph shows year-average growth in nominal business capital expenditure and its two components, equipment and buildings. The graph presents growth for the three years from 2001/02 to 2003/04. Growth in the latter two years is estimated using investment intentions data from the Capital Expenditure survey, which is adjusted by a 5-year average realisation ratio to compensate for firms' tendency to initially underestimate their investment spending.
The graph illustrates that after modest growth in 2001/02, capital expenditure is expected to increase strongly in 2002/03, by around 15 per cent, reflecting a significant increase in spending on both equipment and buildings, with particularly rapid growth in the latter component. This exceptional pace of growth is not expected to be repeated in 2003/04, owing to more modest rises in both components, though growth is expected to remain strong; growth in building investment is expected to continue to outstrip that in equipment spending.
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Graph 9: Farm GDP
The graph shows the yearly per cent change in farm GDP from 1980/81 to 2001/02, with a forecast for 2002/03.
It highlights the sharp drop in farm production expected in 2002/03 on account of the drought. The expected fall in farm product of nearly 25 per cent would be the most severe since the drought of the early 1980s.
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