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Cross-country dynamics during COVID-19

Output, demand, and inflation in Canada, Germany, and the U.S.

The economic effects of COVID-19 and the subsequent recovery have been markedly different across countries. So it’s a good thing FRED has international data. Here, we compare the recent dynamics of output, demand, and inflation for three developed economies: Canada, Germany, and the United States.

Output: GDP

Economic activity contracted sharply in all three countries with the onset of COVID-19 in early 2020. The contraction was mildest in the U.S. and most severe in Canada. But the economic differences across these countries become wider throughout the recovery. The U.S. recovered the fastest, with real GDP in 2021:Q4 about 5% higher than in 2020:Q1. The recoveries in Canada and Germany have been slower: Real GDP in 2021:Q4 increased about 2.5% and 0%, respectively, relative to 2020:Q1.

Demand: Imports

These differences in output are paralleled by the differences in demand. We use real imports of goods and services in the FRED graph above as a proxy for aggregate demand. The U.S. experienced the mildest contraction and the sharpest recovery: Import levels in the U.S. had surpassed their pre-pandemic levels by 2020:Q4 and currently stand close to 15% higher than pre-pandemic levels. Imports in Canada and Germany were still below their pre-pandemic levels in 2021:Q2 and 2021:Q3, respectively.

Inflation: CPI

Not surprisingly, these differences in output and demand are paralleled by the differences in inflation. During the recession itself, consumer price index (CPI) levels in all three countries remained fairly stagnant relative to 2020:Q1. They rose gradually and in tandem until about May 2021. U.S. CPI has accelerated its relative rate of increase since June 2021, potentially as a result of its relatively larger increase in demand.

The differences in these dynamics point to the different effects COVID-19 has had on these economies. Look for a deeper comparative cross-country analysis in future posts, where we hope to disentangle the relative importance of the various forces at play.

How these graphs were created: First graph: Search and select “Real Gross Domestic Product for Germany.” From the “Edit Graph” panel, use the “Add Line” tab to search for and select “Real Gross Domestic Product” and “Gross Domestic Product by Expenditure in Constant Prices: Total Gross Domestic Product for Canada.” Use the “Edit Lines” tab to change units to “Index (Scale value to 100 for chosen date).” Enter the base year date as “2020-01-01.” Click the “Copy to all” button to apply to all series.
Second graph: Use the same steps above to graph “Real Imports of Goods and Services for Germany,” “Real Imports of Goods and Services,” and “Real Imports of Goods and Services for Canada.”
Third graph: Use the same steps above to graph “Consumer Price Index of All Items in Germany,” “Consumer Price Index for All Urban Consumers: All Items in U.S. City Average,” and “Consumer Price Index: Total, All Items for Canada.”

Suggested by Jason Dunn and Fernando Leibovici.

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