Slowing America, surging Britain (and Germany), slumping Japan, with news this week on Australian second quarter growth to position us amid the still solidly performing economies.
America’s second quarter growth was revised down to a sluggish 1.6% (0.4% quarter on quarter), pointing to an even softer performance in the current third quarter.
That was from a first estimate of 2.4% a month ago (0.6% q/q) and the most recent peak of 5.6% in the December quarter of 2009 (1.4% q/q).
So in effect, the slowdown in the US has been so pronounced that in the space of nine months, the annual growth rate now only equals the quarter on quarter rate of the December quarter.
Sluggish consumers, high unemployment and surging imports were to blame in the latest estimate.
In the UK, the second quarter’s growth was revised upwards to a quarter on quarter 1.2%, from the previous estimate of 1.1%; Japan saw a small fall in unemployment, but in the week where exports and imports continued to slow, deflation didn’t, maintaining its 1%-plus a year decline on prices in July.
And Australian growth is expected to come in around a range of 0.8% quarter on quarter to 1.1% or 2.7% annual to 3% (see the Diary).
After the growth figures were released on Friday, our time, Fed chairman, Ben Bernanke told the annual Jackson Hole meeting of central bankers in the US that the American recovery had softened more than expected and reiterated the central bank was ready to take further steps if needed to spur growth.
But he downplayed concerns that the economy might slip back into recession, predicting a modest expansion in the second half of this year with the growth rate picking up in 2011.
He said that if that forecast proves overly optimistic, the Fed has sufficient ammunition left and could support growth by purchasing more government debt or reducing the rate of interest paid on banks’ excess reserves.
"Overall, the incoming data suggest that the recovery of output and employment in the United States has slowed in recent months, to a pace somewhat weaker than most FOMC participants projected earlier this year. Much of the unexpected slowing is attributable to the household sector.
"Falling into deflation is not a significant risk for the United States at this time, but that is true in part because the public understands that the Federal Reserve will be vigilant and proactive in addressing significant further disinflation.
"The committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly."
Bernanke made clear that the US central bank has not decided what would prompt additional easing.
"At this juncture, the committee has not agreed on specific criteria or triggers for further action," he said.
"I expect the economy to continue to expand in the second half of this year, albeit at a relatively modest pace."
Those comments helped spur a recovery in markets in the US, but it won’t last with more figures out this week to test confidence – August jobs numbers, house prices and measures of manufacturing and service sector sentiment.
US growth was smothered by a 32.4% surge in second quarter imports, the largest since the first quarter of 1984.
That more than offset the 9.1% rise in exports, cutting 3.37 percentage points from GDP, the largest subtraction since the fourth quarter of 1947.
Business inventories rose $US63.2 billion, rather than the previously estimated $US75.7 billion, after increasing $US44.1 billion in the first three months of the year.
Consumer spending was revised up to a 2% rate from 1.6% first estimate and 1.9% in the first quarter.
The report also showed corporate profits rose 2.9% in the second quarter after jumping 5.8% in the first three months of the year.
While US growth slows, Britain’s economy grew at its fastest pace in nine years in the second quarter on strong construction activity.
It’s the second European economy to reveal very good second quarter figures; Germany produced 2% quarter on quarter growth for an annual rate of above 8%, the strongest since unification.
The UK’s Office for National Statistics (ONS) said on Friday that gross domestic product grew at 1.2% between April and June, thanks to record-breaking gains in the construction sector, which helped lift the country’s industrial output.
Construction output leaped 8.6% in the three months to June – the strongest since the second quarter of 1963 – up from an initial estimate of 6.6%.
In the year to March, the UK economy grew 1.7%.
But UK analysts warn that the second quarter would represent a peak in the rate of recovery and any further gains of this magnitude were unlikely.
But in Japan, figures released on Friday sent a mixed message about the state of the economy.
Deflation remains deeply entrenched, with core consumer prices falling 1.1% in July from a year earlier.
That more than offset the easing in the unemployment rate to 5.2% from 5.3%.
In June the core CPI, which excludes volatile fresh-food prices, fell 1% from the year-earlier month.
Compared to the previous month’s levels, the core CPI was down 0.3%.
The broader CPI, including food prices, fell 0.9% year-on-year and dropped 0.5% month-on-month.
In other data issued on Friday, household spending rose 1.1% year-on-year after adju
