Japanese economy shrinks, more could follow

The Japanese economy may have entered a recession. From AFP/CNA:

Japan's economy contracted by 0.6 per cent in the three months to June from the previous quarter, official figures showed Wednesday amid growing fears of a recession in Asia's biggest economy.

Household spending fell 0.5 percent, and business investment was unable to compensate, falling by 0.2 percent.

Exports were also disappointing, falling by 2.3 percent. And for June, exports were even down on a year-on-year basis by 1.5 percent.

The euro economy may be next to slip into negative territory. From Bloomberg yesterday:

European industrial production stagnated in June after falling the most in almost 16 years in May as the region's economy capped its worst performance since the launch of the euro in 1999.

Output in the 15 nations that share the currency was unchanged from the previous month, when it dropped 1.8 percent, the European Union's statistics office in Luxembourg said today. From a year earlier, production fell 0.5 percent, the biggest decline since September 2003...

A separate survey of economists shows they estimate the euro-area economy shrank by 0.2 percent in the three months through June. The statistics office is due to publish that data tomorrow.

Advance data show that the US economy continued to grow in the second quarter, but the third quarter has started on a weak note. From Bloomberg yesterday:

Sales at U.S. retailers dropped in July for the first time in five months as record gasoline prices and tighter credit reduced automobile purchases.

Spending dropped 0.1 percent from June, the Commerce Department said today in Washington. Excluding cars, sales rose 0.4 percent, less than anticipated...

Retail sales excluding gasoline decreased 0.2 percent, the Commerce Department said...

Separate Commerce Department figures today showed inventories at U.S. businesses rose half as fast as sales in June as companies prepared for weaker spending. The 0.7 percent gain in the value of unsold goods at factories, retailers and wholesalers was larger than forecast.

But import prices continued to rise sharply in July.

The Labor Department said prices of imported goods soared 21.6 percent in the year to July, the most since at least 1982...

Import prices rose 1.7 percent in July from the previous month, more than economists had projected, after a 2.9 percent increase in June, Labor figures showed.

In contrast to the US, retail sales in China still appear buoyant, rising by 23.3 per cent in July from a year ago.

But economic slowdown appears to be the prevailing trend worldwide now. At least the Bank of England thinks so for the UK economy. From Reuters:

The Bank of England raised hopes of an interest rate cut before year-end on Wednesday as it forecast the current record-breaking spike in inflation would reverse sharply as the economy grinds to a halt...

The central bank's new quarterly forecasts showed inflation -- already running at more than double the 2 percent target and the highest since the series began in 1997 -- would leap to around 5 percent this year.

But thereafter, it would fall dramatically as the effect of rising food and fuel prices wane and economic growth dried up...

Figures out on Wednesday showed the number of people on jobless benefit rose by 20,100 in July, the biggest jump since 1992, and wages rose by the weakest rate in five years in June.