Tags: gdp | countries | calculate | economy | japan

Different Countries Calculate GDP in Different Ways

Different Countries Calculate GDP in Different Ways
(Tinnaporn Sathapornnanont/Dreamstime)

By    |   Monday, 17 August 2020 03:15 PM

Japan’s GDP fell 7.8 percent during the second quarter, after falling 0.6 percent in the first quarter. This was the third straight quarter of contraction and the steepest on record, amid the severe impact of the COVID-19 crisis.

Now, Japan’s GDP almost certainly did not fall 7.8 percent in the second quarter as the only certainty we have with second quarter GDP data anywhere, is that the numbers are wrong, which is of course important for investors who try to plan for the median to longer term.

The media are predictably making much of this being the worst number in modern Japanese history, but really, what else could be expected in the middle of a pandemic.

On an annualized basis, the Japanese economy, which is by the way the world’s third largest economy after the U.S. and China, collapsed 27.8 percent during the second quarter, the deepest on record, and after a 2.2 percent decline in the first quarter, Reuters reported.

There will be, of course, a bounce back in the third quarter.

For investors, it’s worth pointing out that different countries calculate their GDP in different ways. Normally, the differences are too small to be important, but the extreme experience of the current Covid-19 crisis has made them more significant. This will be important in looking at the speed of the economic bounce back. For example, reopening schools in the United States or the UK would directly add a lot to the third quarter GDP, but that would directly add nothing to, for example, French GDP. France is by the way the world’s seventh economy.

In the meantime, this weekend was supposed to be the weekend that the United States and China should get together for talks about trade between the U.S. top trade representative Robert Lighthizer and the Chinese Vice Premier Liu He, but that never materialized. Under the terms of the interim trade deal between the U.S. and China, which was signed on January 15, top-level talks should be held every half year, and August 15 marked six months since the “phase one” agreement went into effect.

Neither Chinese nor U.S. officials had ever confirmed a date for talks between the U.S. top trade representative Robert Lighthizer and the Chinese Vice Premier Liu He.

President Donald Trump said on Saturday that China was scaling up its purchases of U.S. goods “to keep me happy.”

When asked about the talks on Friday and Saturday, Beijing’s foreign and commerce ministries said only that information would be released once confirmed, the South China Morning Post reported.

Besides that, on Friday, President Donald Trump gave the Chinese company ByteDance 90 days to divest itself of any assets used to support the popular TikTok app in the United States.

Trump’s executive order reads: “There is credible evidence that leads me to believe that ByteDance Ltd., an exempted company with limited liability incorporated under the laws of the Cayman Islands (“ByteDance”), through acquiring all interests in musical.​ly, an exempted company with limited liability incorporated under the laws of the Cayman Islands (“Musical.​ly”), might take action that threatens to impair the national security of the United States.”

Trump’s executive order was not a surprise, but the ongoing tensions in the context of the failure to talk trade with China over the weekend is perhaps a little troubling.

It remains unclear what the TikTok orders mean for the app’s 100 million U.S. users, many of them teenagers or young adults who use it to post and watch short-form videos.

Finally, in the sector of the emerging markets, for investors it might be helpful to keep an eye on what’s going on in Turkey that saw its currency, the Turkish lira, further weakening and, please take care, that weakening is set to continue. The Turkish lira crossed 7.4 against the U.S. dollar for the first time ever. The lira has lost almost 20 percent against the dollar so far this year, amid concerns over inflationary pressure, depleted reserves, high external payment obligations and rising current account deficit.

"Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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Different Countries Calculate GDP in Different Ways
gdp, countries, calculate, economy, japan
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2020-15-17
Monday, 17 August 2020 03:15 PM
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