MacroScope

Japan the rule, not the exception

August 18, 2010

Japan may well have looked like the odd-one-out after Monday’s news its economy grew 0.1 percent over the second quarter – about the feeblest expansion possible.

RTR2H9LG.jpgEurope’s big players were already in full swagger after posting growth second quarter growth that often exceeded predictions, and the U.S. economy – although clearly slowing – still expanded at a decent pace over the same period.

But looks are deceptive, especially from preliminary three-month snapshots of the rich-world economies, and Japan’s lethargy is probably still the rule, not the exception.

That’s the message from Reuters monthly polls of more than 250 economists, who see quarter-on-quarter growth in the likes of the euro zone and United States hovering around half a percentage point for some time yet.

Last week’s news of an explosive 2.2 percent quarterly growth rate for Germany and 1.0 percent for  the wider euro zone could prompt forecasters to bump up their predictions in the September poll. Yet there was little sign of them upgrading growth forecasts in the last UK poll, conducted after similarly surprising news that Britain’s economy grew at its fastest pace in four years in the second quarter.

So it wouldn’t be a shock if  our poll respondents conclude Europe’s vigorous second quarter was flash-in-the-pan stuff. Indeed, Bank of England policymakers said the strength of second quarter growth in the UK was “probably erratic”, according to the minutes of their August meeting released on Wednesday.

Widening austerity measures in Europe, worrying unemployment trends in the U.S. and a bunch of encouraging and discouraging economic indicators mean economists will likely remain cautious with their predictions.

Japan faces unique problems – a more immediate threat of deflation and an uncomfortably expensive currency. But the consensus from our polls will still point to one conclusion: the big rich world economies will struggle for momentum over the next year.

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Japan is history, the true ‘has-been’ of economic powers. Remember when these guys were going to rule the world woth their economic prowess? Seems like a million years ago. Gregg Easterbrook posted an excellent column on this yesterday – well worth a read.

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