Friday, August 13, 2004

Yet more evidence that The Big Slowdown is upon us.
Japanese economic growth fell far short of expectations in the June quarter, casting doubt on the momentum of the country�s recovery and sending the stock market tumbling to a three-month low.

Gross domestic product in the three months to end-June rose 0.4 per cent in real terms from the previous quarter, according to official figures released on Friday. That translated into annualised growth of 1.7 per cent compared with a consensus forecast of 4.1 per cent. Nominal GDP fell 0.3 per cent from the previous quarter, shrinking for the first time in five quarters. . . .

Ryo Hino, economist at JP Morgan Chase, called the numbers a �shocking result�, though most economists said the recovery remained largely on track.

Shuji Shirota, economist at Dresdner Kleinwort Wasserstein in Tokyo, said: �The Japanese economy has settled down to a cruising speed after a very strong rebound in the fourth quarter of last year and the first quarter of 2004.�
Considering the Japanese economy was growing at 6% over 2003:IV-2004:I, I'd say this is less a "cruising speed" and more a "rush hour traffic" speed. After all, the US in particular has been complaining to the Europeans for forever that their growth is always so weak -- in the 1-3% range. How then is 1.7% a comfortable pace?

Note in particular how amazingly wrong economists have been today, both on the Japanese GDP data and the US trade deficit. Economists thought 2004:II Japanese growth was going to come in at 4.1% annualized; 1.7% is an incredibly rude awakening. Economists also thought the June US trade deficit was going to come in at $47bn instead of the whopper $56bn tally.

Looks like our professional crystal ball gazers need to remove their rose-colored glasses -- and fast. And workers? I hope you enjoyed the "robust recovery" of 2003-04, because the joy ride is clearly over now.


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