Last week's economic data indicated that the world's major advanced economies are continuing to recover but at least the two largest slowed in the second quarter.
On Friday, the Commerce Department reported that real gross domestic product in the United States increased at an annual rate of 2.4 percent in the second quarter. This was lower than the first quarter growth rate of 3.7 percent, indicating that the world's largest economy has slowed.
The Commerce Department also reported revisions to prior quarters' GDP growth rates. The first quarter growth rate was revised up from 2.7 percent. However, the revisions to prior years showed that the recession was deeper than previously estimated as the economy shrank 4.1 percent from the fourth quarter of 2007 to the second quarter of 2009 instead of 3.7 percent based on previous figures.
Consumer spending, a key driver of the economy, failed to gain momentum in the second quarter. In fact, growth in real personal consumption expenditures actually slowed to a 1.6 percent annual rate from 1.9 percent in the first quarter.
Contrary to previous estimates, consumer spending has not fully recovered from the recession. Previous estimates had indicated that real personal consumption expenditures in the first quarter had surpassed the peak in the previous expansion cycle in the fourth quarter of 2007. The revised figures show that this was not the case, and even after further growth in the second quarter, real personal consumption expenditures remained lower than its previous peak.
The slowdown in the US economy could persist into the second half of the year.
On Wednesday, the Commerce Department had reported that durable goods orders fell 1.0 percent in June. This was the second consecutive month of decline for this indicator.
As durable goods orders is a leading indicator for the manufacturing sector as well as the economy as a whole, this developing trend is a cause for concern. Having said that, it is also a volatile indicator, so it is too soon to make any definite projections from the recent declines.
Last Friday had also provided a host of data on the world's second largest economy, Japan's.
Household spending in Japan rose 0.5 percent in June from a year before after having fallen in the previous two months. Further improvement in consumer spending could be held back as unemployment hit a seven-month high of 5.3 percent in June. However, the employment picture itself may be improving nevertheless as the job-to-applicant ratio rose to 0.52 in June, the most since March 2009.
Meanwhile, deflation in Japan is easing as the consumer price index excluding fresh food fell 1.0 percent in June compared to falls of 1.5 percent and 1.2 percent in April and May respectively.
Still, evidence of slowing in the economy came from a 1.5 percent fall in industrial output in June from the previous month. For the second quarter as a whole, industrial output was up 1.4 percent from the first quarter but this was the slowest rate of increase since the economy emerged from recession in the second quarter of 2009.
As for the euro area, despite the negativity surrounding Europe's sovereign debt problems, confidence in the economy appears to have held up well. Last Thursday, the European Commission reported that its economic sentiment indicator for the euro area rose to 101.3 in July from 99.0 in June, its second consecutive month of increase following a decline in May.
The decline in the economic sentiment indicator in May was only the second in the 16 months since the indicator hit a low in March 2009. The latter had presaged the end of the recession in the euro area.
With the increase in the economic sentiment indicator in the last two months, the upward trend in the indicator appears to have resumed, which would suggest that the eurozone economic recovery remains intact.