August 17, 2009
Economic Outlook: Good news for how long?
Japan's gross domestic product grew almost as much as expected in the second quarter, government figures released Monday showed.
Economists had predicted the GDP would grow 1 percent. The government put the figure at 0.9 percent with a strong rebound in exports, which grew 6.3 percent compared to the first quarter, while imports dropped 5.1. percent.
Markets in Japan and elsewhere shrugged off the number, the Nikkei 225 in Tokyo losing 3.1 percent, the largest one-day drop in five months, as economists questioned how sustainable the growing GDP could be.
Although conceding that a major portion of the growth was provided by a Japanese stimulus package,
the results were very positive, Takuki Aida, a senior UBS Securities Japan economist, told The New York Times.
It's true, Japan would not have achieved growth without government stimulus. Still, the data shows that inventory adjustment, is all but over and we can expect growth going forward, he said.
BNP Paribas economist Ryutaro Kono agreed the stimulus spending was helpful, but disagreed that it had altered fundamentals. With the prop holding up the Japanese GDP a temporary one,
a self-sustaining recovery is still not in sight, he said.
Similar sentiments were voiced last week by University of Maryland economist Peter Morici, who said the end of stimulus spending in the United States, sometime in 2012, would prompt a return of the economic downturn.
Morici also said the United States is trading its way out of contention, giving away manufacturing jobs with huge trade deficits with China and the Organization of Petroleum Exporting Countries. In Japan, the turnaround appears to answer that concern, with exports rising and imports falling.
The U.S. Federal Reserve last week said
economic activity is leveling out, but the U.S. trade gap grew in June, reversing a recent trend. Similarly, Germany's 0.3 percent growth in the second quarter has been attributed to rising exports.
Behind the first rise in Japan's GDP in five quarters are 5.4 percent unemployment and falling wages, the Times said. A decline in oil prices has prompted a fear that deflation could constrain domestic spending in Japan.
Deflation is as scary to economists as it is welcomed by consumers, who might feel it is their due to see prices tumble. But the dynamic pushes buyers to wait and an entire economy waiting is an economic glacier.
And just when the economy could use some spending, U.S. consumers are learning to save, tucking away 5.2 percent of their disposable income in the second quarter, compared to 1.2 percent saved in the first quarter of 2008.
In Hong Kong, the Hang Seng index fell 3.62 percent. The Singapore Straits Times dropped 3.25 percent and the S&P/ASX in Australia fell 1.63 percent.
In midday trading in Europe, the FTSE 100 in Britain dropped 2.2 percent and the DAX 30 in Germany fell 2.33 percent. The CAC 40 in France dropped 2.67 percent and the pan-European DJStoxx 500 fell 2.47 percent.