Euro Area Business Cycle Dating Committee

Europe and the US

A comparison between the recent US and euro-area experiences shows some interesting differences and illustrates further why we cannot declare a euro-area recession for the recent period. Current NIPA data show a peak in US GDP in 2000q4 (compare the NBER date of March 2001). According to these data, GDP declined for three consecutive quarters (though 2001q3). The cumulative decline over that period was -0.62%. Cumulative GDP growth from 2000q4 through 2003 was 4.12%. The corresponding numbers for employment (over age 16, measured month middle of quarter) have been -0.75% and +0.14%.

Now consider the euro area, taking 2001q1 as the base period (growth was positive and robust in that quarter, unlike the US). The cumulative change of euro area GDP from 2001q1 through 2001q4 was +0.1%. Cumulative GDP growth from 2001q1 through 2003q2 was +1.1%. The corresponding numbers for employment (based on data in ECB Monthly Bulletin) are +0.5% and +0.76% (the latter through 2003q1).

Thus the euro-area economy has essentially stagnated since 2001q1, and we have observed neither the sharp (though short) decline in GDP that the US experienced nor the US recovery. This appears to repeat the pattern seen in the 1980s: euro-area GDP is less volatile than that of the US. Note also that employment in the euro area has continued to grow somewhat (although more slowly than in the 1990s), whereas that in the US has not.

Looking back at historical business cycle data, it should be noticed that there is no clear pattern of lead-lag relation between the US and the Euro area. The 1970s recessions are synchronized, while in the 1990s the US recession led the European recession. In the 1980s, the euro area output behaviour was smoother than in the US: the Euro area experienced a long mild recession, while the US had two short sharper recessions. Finally, as discussed above, while in recent years the US experienced a recession and is now showing a recovery (the NBER has dated both a peak and a trough for the US in 2001), current signals from the Euro area are mixed (see Figure 14).

Figures 15 to 17 report US GDP and some other key macroeconomic variables. Peaks and troughs are more clearly synchronized across variables in the US than in the euro area.