The last week of each month brings updates in the health of the Japanese economy: for all of this year the news has been bad, some times terrible.
Lately there’s been improvement, as we saw with June’s industrial output report midweek.
Industrial output is one of the key indicators of the health of the Japanese economy because of the dominant role exports and big exporters play (the NECs Sonys, Nissan, Toyotas, etc).
(Just as consumer spending is perhaps the best indicator for the health of the US economy, given the way consumer spending has driven US economic growth for well over a decade.).
Industrial production has been recovering now for four months, exports are trending higher, but imports remain weak, thanks to low overall demand and the impact of lower prices for oil, metals, coal, LNG and iron ore.
But unemployment has been rising, and retail spending falling, with prices collapsing under the weight of the lower prices of oil and gas.
On Friday Japan’s unemployment rate rose to a six-year high of 5.4% in June, up from 5.2% and within striking distance of its post-World War II high of 5.5% in April 2003.
The number of people out of work in June increased by 830,000, or 31.3%, from a year earlier to 3.48 million.
The government said there were only 43 job offers for every 100 job seekers in June, a record low and down from 44 in May.
And while Japanese household spending edged up 0.2% in June from a year earlier (which was probably government stimulus spending paid to each resident of around $US150 each), the real story was the sharp fall in inflation.
Core consumer (minus food) prices fell a record 1.7% in June from the same month of 2008. That includes oil.
When oil and energy costs are taken out, consumer prices still dropped 0.7%, the biggest fall in four years.
The core reading (excluding fresh food) had fallen 1.1% in May from May 2008.
Japan’s consumer prices fell at a record pace in June, adding to signs that deflation may hamper a rebound from the nation’s worst postwar recession.
Economists in Tokyo expect the drop in core prices to accelerate through the third quarter and exceed 2% because current price levels will be compared to the September 2008 quarter when oil and energy prices were at record levels.
While industrial production rose 8.3% in the June quarter, both wholesale prices and the cost of corporate services (two measures of price pressures for business) also fell sharply.
Taiwan’s economy will fall by a bit more than previously expected, even though its in a recovery phase.
The Taiwan Institute of Economic Research said it had revised its forecast because the service sector’s performance did not perform as well as expected in the first half year, manufacturing investment fell by more than expected and domestic consumption failed to rise by as much as thought.
But the economy is expected to report growth in the third quarter, the Institute said.
Overall the Institute saw the economy contracting by of 4.25% in the second quarter, but growing 0.2% and 7.1% respectively in the third and fourth quarters.
Taiwan’s economy suffered a record 10.2% fall in the first quarter as the island’s exports were hard hit by the global slump.
Weak exports would continue to be a problem for the rest of the year with the Institute predicting they would contract by 14.4% for the full year.
And figures out on the weekend confirm that China’s economy remains in positive territory, with manufacturing expanding for a fifth straight month.
The monthly purchasing managers index edged up 0.1 points in July to 53.3 points, the China Federation of Logistics and Purchasing said Saturday.
(Any number above 50 indicates the economy is expanding.)
New orders were unchanged at 55.5 points on the 100-point scale. New export orders jumped 0.7% to 52.1 points, but demand from Chinese firms lagged with imports falling to 48.9 in July from 49.9 in June — a sign that domestic companies remain cautious in the face of a sharp global downturn.
And a Chinese bank said at the weekend that the economy would grow by 8.5% for the whole year, indicating it saw an acceleration ahead in the final five months of 2009.
The Bank of Communications said growth is expected to accelerate to an annual rate of 9% in the third quarter and 9.8%, after the 7.9% rate reported for the second quarter.
The bank said that would allow the country to meet the official growth goal of 8% for the year.
And in Europe, the Economic Sentiment Indicator (ESI) for the European Union (EU) and the euro area improved further in July, the fourth consecutive increase in both areas since the low reached in March.
However, in both areas, the level is still far below the long-term average. The ESI increased by 3.9 points in the EU to 75, and by 2.8 points in the euro area to 76 points.
The EC said industrial confidence indicator continued its recovery, backed by a further improvement in production expectations and normalisation in the level of business stocks.
Manufacturers’ order books have finally shown some improvement after a slide that has lasted more than a year.
The increase in the ESI resulted from a general improvement in sentiment in all sectors, except construction which remains depressed, but services picked up noticeably.
A majority of the EU member states registered an improvement. A
