Macro snapshot  — UK factory output slows; Germany on cusp of recession; Japan slashes GDP to 2%

CAIRO: While the UK’s factory output steadied at the slowest pace in over a year as inflation continued to rise, Germany’s business morale dropped below expectations this month. The economic growth of the US slowed down but was deemed ‘necessary’ by Treasury Secretary Janet Yellen; Japan slashed its gross domestic product to 2.0 percent due to declining global demand. 

UK factory output slows, price pressures come off-peak — CBI

British industrial output grew at the slowest pace in over a year in the three months to July, but there are tentative signs that some challenges around inflation and investment are easing, a Confederation of British Industry survey showed on Monday.

The Bank of England’s Monetary Policy Committee must decide next week whether to speed up the pace of interest rate rises with a rare half-point rate rise to tackle the highest inflation in 40 years.

Surging inflation has driven consumer sentiment to its lowest since records began in the 1970s, but business activity has been slower to weaken.

Germany on cusp of recession 

German business morale fell more than expected in July, the Ifo business sentiment survey showed on Monday, as the institute that compiles it said high energy prices and looming gas shortages had left Europe’s largest economy on the cusp of recession.

The Ifo institute’s closely watched business climate index dropped to 88.6, its lowest in more than two years and below the 90.2 forecasts in a Reuters poll of analysts. June’s reading was marginally revised down to 92.2.

“Recession is knocking on the door. That can no longer be ruled out,” said Ifo surveys head Klaus Wohlrabe.

Japan slashes GDP growth forecast to 2 percent 

Japan’s government slashed its economic growth forecast for this fiscal year largely due to slowing overseas demand, highlighting the impact of Russia’s war in Ukraine, China’s strict COVID-19 lockdowns, and a weakening global economy.

The forecast, which serves as a basis for compiling the state budget and the government’s fiscal policy, included much higher wholesale and consumer inflation estimates as surging energy and food costs and a weak yen push-up prices.

The world’s third-biggest economy is now expected to expand about 2 percent in price-adjusted real terms in the fiscal year ending in March 2023, according to the Cabinet Office’s projections, presented at the Council on Economic and Fiscal Policy – the government’s top economic panel.

That marked a sharp downgrade from the government’s previous forecast of 3.2 percent growth released in January. The cut largely stemmed from weaker exports, which the government expects to expand by 2.5 percent compared to 5.5 percent in the previous assessment.

US economy slowing, but recession not inevitable

US Treasury Secretary Janet Yellen said on Sunday that US economic growth is slowing and she acknowledged the risk of a recession, but she said a downturn was not inevitable.

Yellen, speaking on NBC’s “Meet the Press,” said strong hiring numbers and consumer spending showed the US economy is not currently in recession.

US hiring remained robust in June, with 372,000 jobs created and the unemployment rate holding at 3.6 percent. It was the fourth straight month of job gains in excess of 350,000. 

“This is not an economy that is in recession,” said Yellen. “But we’re in a period of transition in which growth is slowing and that’s necessary and appropriate.”

(With input from Reuters)