Economists were overjoyed because Japan’s GDP only contracted at an annual rate of 1.3% based on readings from the past quarter. They had expected a figure closer to 2.6%. Consumer activity was also better than anticipated. The trouble is that Japan’s economy is contracting at all, whether it is better or worse than expected. The earthquake did not hurt GDP as much as forecast. That does not mean that the global economy will benefit as the world’s third largest nation based on GDP falters.
U.S. GDP growth is barely better than 2%. Most data from the EU show that the economy there is contracting, despite strength in Germany. The UK economy has ground to a halt, as has France’s. That leaves China, and to a much smaller extent India and Brazil, to carry the burden of the world’s economic health.
One by one, the world’s largest economies have stumbled, not entirely unlike the way they did in 2008 and 2009. And, the dominoes that fell in those years have begun to topple again. Consumer confidence in the U.S. reached a 31-year low last month. Financial officials in the UK say they are concerned that there are no solutions as the nation slips into recession. The view of the risk of the sovereign debt of a number of European nations has only grown despite a curtailment of short selling and attempts by the EU to rescue Greece and Portugal.
Japan may have fallen behind China in GDP last year. But, it is still a primary cornerstone of the global economy. And, that cornerstone is still badly broken.
Douglas A. McIntyre
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