Europe contracts and Japan faces deflation as US consumer spending slows

Europe is clearly in recession. Friday brought us news that France’s economy contracted 1.1 percent in the fourth quarter, the steepest decline since the final quarter of 1974. The UK economy contracted 1.6 percent in the fourth quarter, the sharpest decline since 1980.

And the recession is likely to persist for at least a while more. From Bloomberg:

Industrial orders in the euro area fell 34 percent from the year-earlier month, the European Union statistics office in Luxembourg said today. The January drop was the biggest since the data series started in 1996 and exceeded the 28 percent decline economists forecast in a Bloomberg News survey. From the prior month, January orders fell 3.4 percent.

Meanwhile, deflation looms in Japan. From Bloomberg:

Japan’s consumer prices stalled in February and retail sales tumbled the most in seven years, signaling a return to deflation is likely to deepen the recession.

Prices excluding fresh food were unchanged from a year earlier, the statistics bureau said today in Tokyo. Retail sales declined 5.8 percent, the Trade Ministry said, more than the 3 percent economists predicted.

The outlook for the global economy, however, still depends to a large extent on the US economy's performance. There, the news on Friday was somewhat mixed, as Bloomberg reports:

American consumers’ spending slowed in February and their confidence remained near a three-decade low this month, reflecting the toll of a deteriorating job market.

Purchases advanced 0.2 percent after climbing 1 percent in January, the Commerce Department said today in Washington. The Reuters/University of Michigan final index of consumer sentiment was 57.3 in March after 56.3 in February...

Adjusted for inflation, spending dropped 0.2 percent, following a 0.7 percent gain the prior month.

Disposable income, or the money left over after taxes, decreased 0.1 percent, after rising 1.6 percent the previous month. Adjusted for inflation, disposable income dropped 0.4 percent...

Still, the inflation-adjusted spending so far this quarter is higher than the fourth-quarter average, setting the stage for a gain after plunging late last year.