Today SLL features four articles that look under the hood of three different developed country economies: Japan, Spain, and Canada, and at a global deflation alert. The upshot: things are not looking that good.
From Michael Krieger at libertyblitzkrieg.com, “Japan’s Economic Disaster – Real Wages Lowest Since 1990, Record Numbers Describe “Hard” Living Conditions”:
With so much attention rightly focused on China at the moment (see: Chinese Authorities Arrest Over 100 Human Rights Activists and Lawyers in Desperate Crackdown on Dissent), people aren’t paying enough attention to the budding economic calamity unfolding in Japan.
While “Abenomics” has succeeded in boosting the stock market and food prices, it has utterly failed to raise wages. In fact, wages adjusted for inflation have plunged to the lowest since 1990. As such, a record number of households now describe their living conditions as “somewhat hard” or “very hard.”
To continue reading: Japan’s Economic Disaster
From Don Quijones at wolfstreet.com, “Spain Is Not Greece, It’s Spain (And That’s Worrying Enough)”:
Following Alex Tsipras’ humiliating capitulation to the Troika this Monday, one can imagine governments across Europe breathing a collective sigh of relief, tinged no doubt with a little schadenfreude. The loudest sigh was probably not in Berlin, as one might suspect, but in Madrid where the scandal-tarnished Rajoy government arguably had most to lose from a Syriza triumph (or even half-triumph), with general elections lurking just around the corner.
As the former Greek finance minister Yanis Varoufakis just admitted to the New Statesman, he and Tspiras chronically underestimated the strength of opposition to a new Greek debt deal among the governments of fellow peripheral nations Portugal, Spain, Italy and Ireland.
“The greatest nightmare” of those with large debts – the governments of countries like Portugal, Spain, Italy and Ireland – “was our success”. “Were we to succeed in negotiating a better deal that would obliterate them politically: they would have to answer to their own people why they didn’t negotiate like we were doing.”
Unlike Syriza, Spain’s government has happily danced to the Troika’s tune throughout its tenure. The result, according to Spain’s Premier Mariano Rajoy, has been an unprecedented economic turnaround – one which, in the words of his Minister of Finance and Public Administration, Cristobal Montoro, should serve as an example to the world.
On paper Rajoy and Montoro may have a point. Spain’s economy does indeed appear to be firing on all cylinders. In its latest quarterly economic outlook, the Spanish bank BBVA revised upward its GDP growth forecast for Spain from 2.7% to 3% in 2015. This is no mean achievement for an economy that just three years ago was in the deepest throes of recession.
An Economic Fairy Tale
There is just one problem with this storyline – GDP growth in Spain, as elsewhere, tells only part of the story, albeit an important one. While almost everyone (economists, journalists, eurocrats, Troikaytes and even many Spanish citizens) desperately clings to the dream that the worst is over, they wilfully ignore one niggling fact — namely, that the government’s version of events is riddled with gaping holes:
“Many Little Greeces.” Since Rajoy won the last elections in November, 2011, Spain’s public debt has grown at a faster rate than any time in its post-Franco history. A staggering €590 billion – the equivalent of 30 percentage points – have been added to the country’s total debt during the last three and a half years of government-imposed “austerity.”
To continue reading: Spain Is Not Greece
From Wolf Richter at wolfstreet.com, “Canada’s Recession is ‘Quite Contained’?”:
“In the current context, if you look at the growth numbers, the recession is effectively in the goods sector, it’s in the oil industry, it’s weak growth in manufacturing, weak growth in construction,” explained Kevin Page, Canada’s former parliamentary budget officer, a watchdog role charged with analyzing the state of the economy and government finances.
But there’s “still lots of growth in the service sector,” he told CBC radio. So, with an eerie echoe of the Fed’s description of the US housing bust in the early stages of the Financial Crisis, he said, “It’s quite contained.”
That’s what everyone is hoping. And it would just be a technical recession – two consecutive quarters of negative growth – rather than an official recession.
There wasn’t a lot of room for optimism. The economy shed 6,400 jobs in June, according to Statistics Canada, with gains in full-time jobs and losses in part-time jobs. The unemployment rate remained at 6.8%, same since February. But there are numerous indications that contractors, which do much of the work in the oil patch, are still working, but a lot fewer hours, and that this deterioration, in Calgary for example, hasn’t been fully captured by unemployment statistics.
“If you look at the job picture, it’s gotten progressively weaker through the summer,” Page said. “I think that would be a concern for the government and a concern for the overall strength of our economy.”
“The economy’s weak, you can’t deny that,” Page added. “It will be pretty hard for Minister Oliver to keep that line that we’re not in a technical recession.”
From Mike Mish Shedlock at davidstockmanscontracorner.com, “Global Deflation Alert: US Import and Export Prices Down Again In June,”:
Another One-Hit Wonder
In spite of counterproductive attempts by the Fed and Central Banks to foster price inflation, debt overhang has stymied those efforts, at least in regards to consumer prices and import/export prices.
Last month, following a surge in gasoline prices, import and export prices did rise a bit, but as with retail sales, the import/export price report was another “one-hit wonder”.
Missed Boat Again
Bloomberg Econoday Economists again missed the boat.
Cross-border deflationary pressures are not abating as import prices fell 0.1 percent in June with export prices down 0.2 percent. Year-on-year, import prices are down 10.0 percent with export prices down 5.7 percent. These rates are not showing any improvement from prior months with import prices not even getting much of a lift from the bounce back in petroleum prices as the ex-petroleum reading fell 0.2 percent in the month. Year-on-year, ex-petroleum import prices, and this is a core reading, are down 2.6 percent.
Outside of monthly gains for petroleum components, negative signs sweep both the import and export columns with agricultural exports, at minus 1.5 percent in June, extending a deep run of declines. Year-on-year, agricultural export prices are down 16.7 percent in what is not good news for the nation’s farming sector. A look at finished goods categories shows no price strength anywhere with import prices for capital goods, at a year-on-year minus 1.7 percent, and export prices for consumer goods, at minus 1.9 percent, especially weak.
By country, import prices fell 0.5 percent with the NICs, down 0.4 percent with Japan, and down 0.1 percent with China. Prices rose 0.4 percent for Canada, up 0.2 percent for the EU, and up 0.1 percent for Latin America.
The strength of the dollar is pulling down import prices but the decline in export prices points to a lack of global price pressures. This report is a reminder that inflation is not yet picking up steam toward the Fed’s 2 percent goal and hints at similar results for this week’s later releases of producer and consumer prices.
To continue reading: Global Deflation Alert
