With Japan, the Number of Economies in Recession Grows

December 10, 2012 by Douglas A. McIntyre

155329593Japan has fallen into recession, which has been expected for some time. Japan’s Cabinet Office reported that third-quarter gross domestic product contracted 3.5% on a per annum basis. That was worse than most economists expected. With one more major nation in deepening trouble, a global recession is probably only a quarter away.

The front pages of the financial press cover Europe’s recession every day. GDP on a nominal basis has begun to move lower in several nations among the top 15 globally based on that measure. This certainly includes Spain, Italy and perhaps France and the United Kingdom. Based on recent European Central Bank projections, even Germany could be added to that list soon.

Also on almost every front page are descriptions and analyses of what will happen if the Congress and White House fail to resolve automatic tax and spending cuts before the economy reaches the fiscal cliff at year’s end. The Congressional Budget Office has forecast that this may cause a recession in the first half. CEOs from companies with businesses as disparate as those of Goldman Sachs Group Inc. (NYSE: GS) and General Motors Co. (NYSE: GM) expect their results to be badly hurt if there is no resolution. That, of course, restrains hiring and investments in expansion.

If the United States falters, it leaves only China, Brazil and India among the huge economies that continue to expand. Less than a week ago, many economists cut their forecasts for Brazil’s GDP growth — some to as low as 3.5%. And India’s economy grew only 5.3% in the third quarter, a sharp drop from previous quarters. The AP reported:

India is struggling with high inflation and high interest rates, coupled with a wide fiscal deficit, weak currency, and uncertain policy environment, which have hit both consumption and investment.

China’s economy continues to grow at about 8%, but it is very difficult to make a case that can continue if the balance of the world’s largest economies stall.

A recession, which experts feared would happen in 2013, has come close to a certainly as move and more large economies stumble.

Douglas A. McIntyre

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