Faster US growth, lower Japanese consumer prices

Yesterday, the Commerce Department reported that the US economy grew 4 percent in the second quarter, somewhat faster than the 3.4 percent growth rate originally estimated a month ago. Although the revision was largely in line with expectations, it does remind us why the Federal Reserve may see little need for a cut in interest rates when it meets next month.

On the other hand, there may also be little impetus for the much-anticipated rate hike from the Bank of Japan after the latest batch of data. From Bloomberg:

Japan's consumer prices declined for a sixth straight month in July, signaling the world's second-largest economy has yet to beat deflation.

Core consumer prices, which exclude fresh food, fell 0.1 percent from a year earlier, the statistics bureau said in Tokyo today, matching the median estimate of economists. Prices fell at the same pace in the preceding three months...

Tokyo's core prices, seen as an indicator of the nationwide index, were unchanged in August from a year earlier, reversing two months of declines. Economists expected a 0.1 percent drop.

Other reports today showed industrial output and household spending may be slowing, though economists said the figures were affected by one-time events.

Factory production slid 0.4 percent in July after an earthquake disrupted output at automakers Toyota Motor Corp. and Honda Motor Co. Output would have risen had automakers not dragged the number down 1.2 percentage points, the Trade Ministry said.

Spending by households unexpectedly dropped for the first time in seven months, as a typhoon kept shoppers at home and a tax increase weighed on sentiment.

Employment prospects improved. The jobless rate fell to 3.6 percent in July, the lowest since February 1998, from 3.7 percent. A ratio that shows how many positions are on offer for each job seeker held at 1.07, near a 14-year low of 1.09...

Investors see a 12 percent chance policy makers will raise the key rate at the Sept. 18-19 meeting, according to Credit Suisse Group calculations based on interest payments.