gordeeva_o_g_praktikum_po_perevodu_ekonomicheskih_tekstov_s

Eurozone grows at fastest rate in three years

The eurozone economy expanded at its fastest rate since early 2001 in the first three months of this year as robust growth in the US and Asia fueled heavy demand for European exports.

But economists said they doubted the recovery momentum was sustainable, given the continuing weakness of consumer demand in the 12-nation block and signs that global growth may be peaking.

Eurostat, the European Union’s statistical agency, said the region’s economy grew at a quarter-on-quarter rate of 0.6 per cent in the first three months, and by 1.3 per cent from a year earlier.

The figures mark a significant rebound for the eurozone after three years of dismal growth. But it still lags well behind other important economies such as the US, which grew almost 5 per cent year-on-year in the first quarter.

But economists said the provisional data, which did not include a detailed breakdown, suggested growth was largely the result of a strong net trade contribution, itself the result of weak import growth. Exports are robust because of strong global demand. But the data also reflect weak imports which were in turn a result of weak domestic demand.

Domestic demand might also weaken if oil prices drive up inflation.

With oil prices rising above $40 a barrel, the ECB has started to warn that energy costs could fuel inflation just as recovery takes firmer hold.

Diagnosing depression

What is the difference between a recession and a depression?

The word “depression” is popping up more often than at any time in the past 60 years, but what exactly does it mean? The popular rule of thumb for a recession is two consecutive quarters of falling GDP.

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America’s National Bureau of Economic Research has officially declared a recession based on a more rigorous analysis of a range of economic indicators. But there is no widely accepted definition of depression. So how severe does this current slump have to get before it warrants the “D” word?

A search on the internet suggests two principal criteria for distinguishing a depression from a recession: a decline in real GDP that exceeds 10%, or one that lasts more than three years. America’s Great Depression qualifies on both counts, with GDP falling by around 30% between 1929 and 1933. Output also fell by 13% during 1937 and 1938. The Great Depression was America’s deepest economic slump (excluding those related to wars), but at 43 months it was not the longest: that dubious honour goes to the one in 1873-79, which lasted 65 months.

Japan’s “lost decade” in the 1990s was not a depression, according to these criteria, because the largest peak-to-trough decline in real GDP was only 3.4%, over the two years to March 1999. Since the second world war, only one developed economy has suffered a drop in GDP of more than 10%: Finland’s contracted by 11% during the three years to 1993, mainly thanks to the collapse of the Soviet Union, then its biggest trading partner.

Emerging economies, however, have been much more depressionprone. Among the 25 emerging economies covered each week in the back pages of The Economist, there have been no fewer than 13 instances in the past 30 years of a decline in real GDP of more than 10%. Argentina and Poland were afflicted twice. Indonesia, Malaysia and Thailand all suffered double-digit drops in output during the Asian crisis of 1997-98, and Russia’s GDP shrank by a shocking 45% between 1990 and 1998.

Before the 1930s all economic downturns were commonly called depressions. The term “recession” was coined later to avoid stirring up nasty memories. Even before the Great Depression, downturns were typically much deeper and longer than they are today. One reason why recessions have become milder is higher government spending. In recessions governments, unlike firms, do not slash spending and jobs, so they help to stabilise the economy; and income taxes automatically fall and unemployment benefits rise, helping to support incomes. Another reason is that in the late 19th and early 20th centuries, when countries were on the gold standard, the money supply usually shrank during

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recessions, exacerbating the downturn. Waves of bank failures also often made things worse.

But a recent analysis by Saul Eslake, chief economist at ANZ bank, concludes that the difference between a recession and a depression is more than simply one of size or duration. The cause of the downturn also matters. A standard recession usually follows a period of tight monetary policy, but a depression is the result of a bursting asset and credit bubble, a contraction in credit, and a decline in the general price level. In the Great Depression average prices in America fell by onequarter, and nominal GDP ended up shrinking by almost half. America’s worst recessions before the second world war were all associated with financial panics and falling prices: in both 1893-94 and 1907-08 real GDP declined by almost 10%; in 1919-21, it fell by 13%.

The economic slumps that followed the collapse of the Soviet Union and those during the Asian crisis were not really depressions, argues Mr Eslake, because inflation increased sharply. On the other hand, Japan’s experience in the late 1990s, when nominal GDP shrank for several years, may qualify. A depression, suggests Mr Eslake, does not have to be “Great” in the 1930s sense. On his definition, depressions, like recessions, can be mild or severe.

Another important implication of this distinction between a recession and a depression is that they call for different policy responses. A recession triggered by tight monetary policy can be cured by lower interest rates, but fiscal policy tends to be less effective because of the lags involved. By contrast, in a depression caused by falling asset prices, a credit crunch and deflation, conventional monetary policy is much less potent than fiscal policy.

Answer the questions.

1.What is the technical definition of a recession?

2.What are the criteria of distinguishing a depression from a recession?

3.How did the term “recession” come about?

4.What causes a depression?

5.What are the policy responses in case of a recession and a depression?

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The sharp contraction of the US economy accelerated in the last three months of 2008, with official figures showing GDP shrinking at an annualised rate of 3.8%.

With forecasters already predicting the worst US recession since World War II, how big a danger is there that the US economy will slip into a depression similar to the 1930s?

The latest figures paint a gloomy picture of the US economy. Consumer spending, which makes up two-thirds of the economy, fell for the second quarter in a row, by 3.5%.

For all the talk of this being a consumer-led downturn, the credit crunch is hitting businesses even harder. This drop was led by a 22% drop in spending on durable goods like automobiles and washing machines. The decline in motor vehicle production was so great that it alone contributed 2% to the fall in GDP.

Businesses hit

Businesses as well as consumers have been hit hard by the slowdown. Exports, which had helped boost GDP earlier in the year, fell

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sharply, by 19.7%, as foreign markets for US products were hit by their own recessions.

Investment fared even worse. Residential investment fell 23.6% as the glut of foreclosed properties reduced new home sales. Business investment was down 19.1%, led by a 27.8% drop in purchases of equipment and software. Business inventories of unsold goods mounted. If the inventory build up - which is likely to be temporary - is excluded, GDP fell at an annualised rate of 5.1%.

Consumers save

The economic uncertainty does seem to be changing consumer behaviour. People are saving more in preparation for the coming downturn. The personal savings rate rose to 2.9%, more than double the 1.2% rate in the previous quarter. Consumers are being hit by a triple whammy: rising unemployment, which could rise from 7% to 10% of the workforce by the end of the year; restricted access to credit; and falling asset values. The fall in stock markets and house prices has reduced household wealth by 20%, from the middle of 2007. This alone has reduced consumption by around 1%, some economists estimate. It may make sense for consumers to save instead of spend, but in an economy as reliant on consumer spending as the US, this does add to recessionary pressures.

How long?

The key question in whether this will turn from a recession to a depression is how long the slowdown will last. In the 1930s, output declined for four years, with GDP cut by half while unemployment soared to one-quarter of the workforce. Despite the New Deal, output did not recover to its 1929 level until World War II when there was a massive boost in government spending.

At the moment, most economic forecasters are predicting that the US slowdown will last around two years, with the economy returning to weak growth by 2010. The National Bureau of Economic Research says the current economic slowdown actually began at the end of 2007 and is likely to be the longest post-war recession.

Government rescue?

The only thing currently boosting the US economy is Federal government spending, which rose 5.8% in the quarter.

But even if Mr Obama gets rapid approval for his $800bn stimulus plan - which has passed the House of Representatives and is currently being considered by the Senate - it will take some time for the money to be felt in the economy.

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It is also unclear how many jobs will be created: President Obama aims to create 3.5 million new jobs, but others say the stimulus package could create between 1.2 and 3.6 million more jobs.

Financial squeeze

The other big uncertainty is whether the financial sector can be restored to health and at what cost. There is now $2.2 trillion of toxic bank debt worldwide, the IMF says, $500bn more than it estimated a few months ago. The collapse of financial markets in the autumn had a dramatic effect on consumer and business confidence.

There are plenty of reasons why growth might be even less than forecast, the IMF's Olivier Blanchard said, not least if banks have so many bad debts, they will further drag down the real economy.

The Obama administration still has $350bn left of the $700bn bailout for banks approved in October last year. It may need to ask for more. If it gets the money it needs and if the money is spent promptly and wisely, the US might just escape with a relatively mild recession. But given the extraordinary events of the past six months, most economists are still hedging their bets.

Андрей Клепач изыскал экономический рост

Вчера, выступая на конференции консалтинговой компании Dun&Bradstreet в Москве, заместитель главы Минэкономики Андрей Клепач сделал несколько любопытных заявлений. Он признал, что дна российская экономика, вопреки мнению большинства экономистов, все еще не достигла. "Сейчас находимся около дна кризиса, и некоторое оживление ожидаем увидеть в июне-июле",— цитирует замминистра агентство "Интерфакс". Ощущение того, что разворот тенденции "не за горами", Андрею Клепачу придал "ряд позитивных сигналов из банковской системы", а также рост цен на нефть и металлы на мировом рынке. "Думаю, во второй половине 2009 года рост будет 4-5% по сравнению с первым полугодием. В результате в целом падение ВВП за 2009 год составит 7-8%, но, что важно, мы выйдем на позитивную динамику во втором полугодии",— заявил господин Клепач. Первое полугодие года для российской экономики является традиционно

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провальным в силу низкого роста в начале года. Таким образом, из года в год рост реального ВВП в первом полугодии является отрицательным, а во втором полугодии благодаря сезонности резко положительным. Оценка возможного роста ВВП на 4-5% во втором полугодии 2009 года по сравнению с первым полугодием, обнародованная Андреем Клепачом исходя из темпов падения ВВП в первом квартале 2009 года в 9,5%, по мнению экономистов ING Russia, очень даже пессимистична. Татьяна Орлова оценивает сезонный рост реального ВВП за второе полугодие в 20,5% в силу низкой базы. Господин Клепач, который заявляет о начале восстановления экономики в июне-июле, видимо, ожидает более низкого экономического роста в первом полугодии.

Вчера же замминистра заявил, что у российской экономики есть возможность избежать стагнации в 2010 году, когда рост может составить около 1%, хотя еще совсем недавно Андрей Клепач называл рост ВВП в 1% стагнацией, объясняя это тем, что он находится в пределах статистической погрешности. Россия "может вернуться на траекторию роста экономики и, если не в 2010 году, то через три года стать одной из наиболее динамично развивающихся стран". Впрочем, если цены на нефть будут держаться на уровне $50 за баррель, то позитивной статистики роста можно ожидать не раньше чем через "год-два", и, кроме металлургии, как надеется Андрей Клепач, его источником станут высокотехнологичные сектора.

Газета «Коммерсантъ» № 98 от 03.06.2009

Exercise 1

Translate the following into Russian.

А.

1.The German economy appears to be stabilizing. Industrial orders rose 2.7%.

2.The weaker dollar may be giving American exporters the big boost, even as the U.S. trade deficit hit an annual record last year.

3.Gross domestic product was predicted to contract in the first and second quarters of this year by 5% and 1.8% respectively on a seasonally adjusted rate.

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4.Overall, the world economy is now expected to contract 1.3% this year – a sharp reduction from the IMF’s January estimate, well below the global growth rate before the economic crisis hit.

5.Japan is expected to suffer the most among advanced economies this year, contracting 6.2% on the back of falling exports.

6.Meanwhile, emerging economies overall are expected to remain in positive territory, growing at a 1.6% pace in 2009 and 4% next year as a group. But an increasing number are sliding into recession, with Eastern European countries faring the worst.

В.

To gather momentum; consumer spending; sustainable growth; to achieve target; to boost investment; soaring prices; to gain productivity; financial turmoil; to sustain losses; tumbling currency; real wages; economic recovery; buoyant profits; export-led recovery; provisional data; overall share of wages in GDP; to fuel a construction boom; robust growth; job insecurity; two successive quarters; upward revision; seasonally adjusted.

UNIT II

LEADING ECONOMIC INDICATORS

№ 2.0

A. Leading Economic Indicators

Economic indicators are statistical data showing general trends in the economy. Those with predictive value are leading indicators; those occurring at the same time as the related economic activity are coincident indicators; and those that only become apparent after the activity are lagging indicators. Examples are unemployment, housing starts, Consumer Price Index, industrial production, bankruptcies, GDP, stock market prices, money supply changes.

Every week there are dozens of economic surveys and indicators released. In the past, experienced professionals and economists had an advantage in receiving these data in a timely fashion. Fortunately, the emergence of the internet has changed this situation by giving everyone access.

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Economic indicators can have a huge impact on the market; therefore, knowing how to interpret and analyze them is important for all investors.

Leading Economic Indicators Predict Market Trends

Economists typically group macroeconomic statistics under one of three headings: leading, lagging or coincident. Figuratively speaking, one views them through the windshield, the rearview mirror, or the side window. But how can an investor determine the direction of the economy in this blizzard of data?

Coincident and lagging indicators provide investors with some confirmation of where we are and where we've been, but here we'll take a look at the leading economic indicators. They're a good place to start, because they help us understand where the economy is heading.

Market Indexes

In order for an economic indicator to have predictive value for investors, it must be current, it must be forward-looking, and it must discount current values according to future expectations. Meaningful statistics about the direction of the economy start with the major market indexes and the information they provide about:

•Stock and stock futures markets

•Bond and mortgage interest rates, and the yield curve

•Foreign exchange rates

•Commodity prices, especially gold, grains, oil and metals

Although these measures are crucial to investors, they aren't generally regarded as economic indicators per se. This is because they don't look very far into the future - a few weeks or months at most. Charting the history of indexes over time puts them in context and gives them meaning. For instance, it is not terribly useful to know that it costs $2 to purchase one British pound, but it may be useful to know that the pound is trading at a five-year high against the dollar.

B. Index of Leading Economic Indicators

Ironically, the Conference Board's Index of Leading Economic Indicators (LEI) really isn't leading data. Upon release, the data is almost

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two months old, and most of the 10 component reports have been released prior to the LEI itself. It purports not to signal a change in market direction until the index has moved in the same direction, up or down, for three consecutive months, which it rarely does. It is widely viewed as a better harbinger of recession than expansion. However, it has predicted a number of recessions that did not occur, having once prompted American economist Paul Samuelson to suggest that "economists have correctly predicted nine of the last five recessions."

Weekly Data

1.The Jobless Claims Report, is a report released weekly by the Department of Labor. In a weakening economy, unemployment filings will trend upward. They are generally analyzed as a four-week moving average (MA), in order to smooth week-to-week variance. However, this report has a built-in bias in that selfemployed persons, part-timers and contract employees who lose their jobs don't qualify for benefits, and thus are not counted.

2.Money supply, an abstract, technical calculation of how much money is sloshing around in the economy is released by the Federal Reserve. An upward trend suggests inflation. However, in a digital world in which vast sums of money can be transmitted across the globe in an instant, this indicator has lost much of its importance over the last decade.

Monthly Data

Several of the monthly data reports present data that is several months old, and can be characterized as leading from the rear, in something of an "I-told-you-so" fashion:

•The New Residential Housing Construction Report, commonly referred to as "housing starts" is a report released by the Census Bureau and the Department of Housing and Urban Development (HUD). This report breaks out building permits issued, housing starts and completions. It is an important leading indicator in that construction activity tends to pick up early in the expansion phase of the business cycle. However, it lacks qualitative information in that it ignores the sizes and prices of the homes it counts.

•The Existing Home Sales Report is released by the National Association of Realtors. Whereas the housing starts report focuses on supply, this report focuses on demand. Together, the two assess the overall health of the housing sector. The data contained in this

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