US recovery broadens, Japanese machinery orders plunge

The US economic recovery appears to be broadening. From Bloomberg on Wednesday:

The U.S. economy improved in 10 of the Federal Reserve’s 12 districts last month, marking a broadening of the recovery, the central bank said today.

“While economic activity remains at a low level, conditions have improved modestly further,” the Fed said in its Beige Book business survey, published two weeks before the Federal Open Market Committee meets to set monetary policy. The Philadelphia and Richmond Fed districts were the exceptions, reporting “mixed conditions.”

But data today show that Japan's recovery remains fragile. Again from Bloomberg:

Japan’s reliance on exports deepened after machinery orders from service companies plunged the most in more than two decades in November.

Orders from non-manufactures dropped 10.6 percent to 380.7 billion yen ($4.15 billion), the lowest since May 1987, the Cabinet Office said today in Tokyo...

Core orders, which exclude shipbuilding and utilities, slid 11.3 percent in November to 625.3 billion yen, the lowest monthly booking since comparable data were first compiled in April 1987, today’s report showed. The drop was the sharpest in a year and worse than all 25 estimates of economists surveyed by Bloomberg...

Other data released today indicate though that the deflationary pressure in Japan may be easing. From Reuters:

Japanese wholesale prices fell 3.9 percent in the year to December, matching a median estimate from analysts, in a sign of persistent deflation due to weak domestic demand.

But the pace of annual decline in the corporate goods price index (CGPI) slowed for the fourth straight month after peaking at 8.5 percent in July and August, Bank of Japan data showed on Thursday, reflecting the waning effect of oil price drops.

Speaking of deflation, Richard Alford has a post at naked capitalism claiming that "the US did not experience deflation at any point between 1996 and 2006, nor were there imminent bouts of deflation" and that therefore, in "so far as the interest rate reductions in 2001-2003 and the painfully slow tightening cycle that ended in 2006 reflected fear of a domestic demand induced deflation, monetary policy was inappropriate".