Japan's economy shrinks

Japan reported today that its economy shrank more than previously estimated in the second quarter. Bloomberg reports:

Japan's economy contracted more than the government initially estimated last quarter after figures showed businesses cut spending.

Gross domestic product shrank an annualized 3 percent in the three months ended June 30, the Cabinet Office said today, more than the 2.4 percent drop reported last month. The median estimate of 27 economists surveyed by Bloomberg News was for a 3.1 percent contraction...

From the first quarter, the economy shrank 0.7 percent, the biggest drop since the third quarter of 2001 and more than the 0.6 percent initially reported. Economists expected a 0.8 percent contraction.

Interestingly, trade subtracted from growth in the quarter.

Exports dropped 2.5 percent and imports fell 2.6 percent. Net exports subtracted 0.1 percentage point from gross domestic product compared with the first quarter.

The downturn may last a while. From AFP/CNA:

Japanese orders for machinery dropped for a second straight month in July, government data showed Thursday, raising further concern about the outlook for the world's second largest economy.

Core private-sector machinery orders...fell 3.9 percent in July from the previous month, the Cabinet Office said, following a 2.6 percent fall in June...

Japan also saw bleak data on Wednesday, with the current account surplus falling on rising energy costs and wholesale prices growing at their fastest pace in 27 years.

The US trade deficit also deteriorated in July but the underlying trend appears to be improving. From Bloomberg:

The U.S. trade deficit widened more than forecast in July because of surging energy prices that have since retreated.

The gap grew 5.7 percent to $62.2 billion, the largest in 16 months, from $58.8 billion in June, the Commerce Department said today in Washington...

Imports climbed 3.9 percent to $230.3 billion in July, reflecting a record $42.6 billion in purchases of crude oil that swelled the deficit with the Organization of Petroleum Exporting Countries. Excluding oil, the trade gap shrank...

Exports increased 3.3 percent to $168.1 billion, led by a $1.4 billion jump in shipments of autos and parts...

July's price-adjusted deficit was smaller than the average for last quarter, indicating trade will again boost growth in the third quarter.

Nevertheless, the US economy will need all the boost it can get.

The Labor Department said separately today that more Americans than forecast filed initial claims for unemployment insurance last week, and total benefit rolls rose to a five-year high. There were 445,000 first-time applications, compared with an average of 321,400 last year.