January 2009 - Posts

The recession hits home
Wednesday, January 28, 2009 4:55 PM
How far  could  housing investment fall in the current crisis? The chart below shows how much further spending could still weaken before reaching previous lows.

  
Source: OECD Economic Outlook database  

Housing investment covers public and private spending on construction and renovation. In many OECD countries spending, calculated as a percentage of GDP, still remains above troughs reached in previous downturns – and economists believe the recession we have entered will be at least as severe as any experienced since 1980.     

In the Netherlands, Belgium, Canada and Denmark, spending at the end of 2008 was still well above the previous lows seen in the period from 1980. Further falls in these countries are likely as the recession hits the construction industry and weakens demand.   

In Japan, Germany and  the US housing investment data from the fourth quarter of 2008 was already weaker than the average of previous troughs seen over the past 28 years. In Germany and Japan in particular, OECD economists say a further sharp weakening of housing investment is unlikely. German investment - at less than 6 percent of GDP – is at a historic low while stricter building regulations had already triggered a sharp fall in Japanese housing investment in 2007.

Further reading:

by Cynthia Coutu | 2 comment(s)
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