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The global financial crisis broke out in August 2007 and the U.S. economy plunged into a severe recession in December 2007 and the recovery commenced in June 2009. The financial crisis touched nearly all major economies across the world. Where do the major economies of the world stand as the fifth anniversary of the crisis is not too distant? If progress is measured in terms of real gross domestic product, the U.S. economy ranks behind Canada in the G7 (USA, France, Germany, Italy, UK, Canada, and Japan) but it is ahead of the euro area. Charts 1-4 are index charts where real GDP in 2008 is set equal to 100. Real GDP of the US economy has advanced 1.78% (see Chart 1) from the first quarter of 2008, while that of Germany has risen only 0.5% and the composite euro area real GDP remains 2.0% below the level posted in the first quarter of 2008. Recent economic developments in Germany and Europe (non-euro and eurozone segments) point to further economic weakness and not economic growth. Of the other members of the G7, the Canadian economy shows an impressive performance with a 3.6% gain in real GDP (see Chart 2) but the United Kingdom and Japan are grappling with sharp declines in real GDP (see Chart 2). Australias economy escaped a recession, posted strong growth (see Chart 2) and raised the official policy rate in 2010 but has eased monetary policy more recently.
Moving over to the BIC nations, needless to say, Chinas economic expansion stands out with a 42% expansion of real GDP since the first quarter of 2008, followed by India (+31%) and Brazil (+11.6%). The bottom line is that growth in the United States has overtaken other advanced nations affected by the financial crisis. The seeds of self-sustained growth have been planted in the United States and the economy is projected to move forward despite the turmoil brewing in Europe.