Latest news with #recession
Japan Times
5 hours ago
- Business
- Japan Times
Japan might be in a technical recession already
Recent economic indicators suggest that Japan might already be in recession, according to a think tank report released last week, as wages remain stagnant and consumer sentiment weak. Gross domestic product (GDP) may have contracted 0.2% in the April-June quarter on an annualized basis adjusted for inflation, Mizuho Research & Technologies said in the report. 'Given consumer sentiment and wage trends, it's likely that consumption remained weak and dragged down the overall economy,' said Saisuke Sakai, chief economist at Mizuho Research & Technologies, who wrote the report. In the January-March quarter, real GDP shrank by 0.2%. A recession is commonly defined as two consecutive quarters of negative GDP growth, though officially calling a recession depends on a wider range of indicators. In Japan, recessions are determined by the Cabinet Office's Economic and Social Research Institute (ESRI). The ESRI bases its assessment on a monthly coincident index that has ten components, including industrial production, retail sales and exports, according to a report by the Conference Board. Two quarters of negative GDP growth alone is usually referred to as a technical recession. Sakai pointed out the economy remained weak in the April-June quarter. Inflation was above 3% every month in that quarter, with food inflation topping 6%. Pay increases lagged price increases for a fifth straight month in May. Consumer sentiment was very weak, according to a Bank of Japan survey released earlier this month. In that report, the diffusion index on living conditions was minus 57.2, the worst reading in nearly 16 years. The index is calculated by subtracting the percentage of people who said living conditions have worsened from the percentage who said conditions have improved. 'This survey was quite shocking," Sakai said. "It seems people are really feeling their living conditions have become tougher due to three consecutive years of declining real wages." The government is scheduled to announce GDP data for the April-July quarter on Aug. 15. Japan may have fallen into a technical recession, but there is no need to be overly pessimistic about the economic situation, Sakai said. The projected contraction of minus 0.2% is quite small, while Japan's potential growth rate is believed to be only in the low-to-mid 0% range, he noted. 'I'd say the Japanese economy has yet to face an economic downturn. For the Japanese economy, this level of negative growth is within the realm of normal fluctuations,' Sakai said. The last time Japan experienced a technical recession was when GDP fell for three consecutive quarters from mid-2023 to early 2024. Since the report by Mizuho Research & Technologies was issued, Japan and the United States achieved a breakthrough in trade talks, and this could be a net positive for the economy. The new 'reciprocal' tariff rate for exports to the United States will be set at 15%, and the rate on cars will be 12.5%. The 50% tariff on steel and aluminum products will remain unchanged. Politics is the main wildcard. The Liberal Democratic Party-Komeito coalition no longer has control of either of the houses in parliament after a drubbing in Sunday's Upper House election, and media reported Wednesday that Prime Minister Shigeru Ishiba is set to step down by the end of August, although the prime minister denied the report.
Zawya
7 hours ago
- Business
- Zawya
AI and gravity-defying US GDP: Mike Dolan
(The opinions expressed here are those of the author, a columnist for Reuters) LONDON - For the second time in three years - and straddling two separate presidencies - heightened U.S. fears of recession have proved wide of the mark. The artificial intelligence boom is once again the prime suspect. The AI explosion and arms race since the launch of OpenAI's ChatGPT in November 2022 had its own mini crisis of confidence earlier this year with the emergence of China's cheaper DeepSeek rival. But neither those doubts nor the market angst about President Donald Trump's tariff war seems to have slowed the staggering capital spend and data center building supporting the AI push. As the brave new world of generative AI enters its third year, the financial impact has expanded well beyond the share price of chipmakers, as data center construction and capex spending more broadly are flattering U.S. GDP to a remarkable degree. Carlyle's Head Investment Strategist Jason Thomas has been arguing all year that this capex spending is an effective re-industrialization of corporate America, reshaping its focus away from software and intangible assets and toward investing in plants and machinery and energy like never before. The GDP impact from that is huge. RE-INDUSTRIALIZE AND BORROW Thomas reckons the AI-related capex boom – in data centers, graphics processing units, server infrastructure, power and related hardware and applications – already accounts for more than one-third of this year's second-quarter U.S. GDP growth. And he points out that order books in the relevant industries continue to grow at annual rates of more than 40%. With Q2 GDP data due out next week expected to show annualized growth of 2.5%, that's a sizeable AI tailwind. The scale of AI-related spending that has already occurred suggests that these are not just finger-in-the-wind estimates. Spending on physical data center infrastructure alone is up fourfold from 2020 levels, offsetting weakness in other construction categories. Among AI chip giant Nvidia's top U.S. customers, Thomas writes, capex has grown 1.5 times as fast as revenue. Property, plant and equipment now account for 70% of typical book value for these firms, up from just 20% before the GenAI scramble began. The big question remains whether AI's contribution to economic growth is now peaking - even if that's difficult to deduce given the hype and optimism around the sector and evidence of robust chip demand growth worldwide. FINANCING GAP But Morgan Stanley this week analyzed this question by considering the borrowing needed to finance the ongoing AI infrastructure and data center buildout. Analysts Vishwanath Tirupattur and Vishwas Patkar forecast roughly $2.9 trillion of additional global data center spending through 2028, comprising $1.6 trillion on chips and servers and $1.3 trillion on real estate, building costs and maintenance. For context, that suggests an annual global outlay over the next three years that's close to the $950 billion spent by all S&P 500 firms combined last year. While some of this can be funded with cash, Morgan Stanley estimates that a $1.5 trillion financing gap remains, which will have to be raised via debt, likely a mix of loans, bonds, asset-backed securities and private funding. On top of this, they reckon that investment spending related to data center construction and power generation will add up to 0.4 percentage points to U.S. GDP through this year and next. Once again, AI is helping frustrate all other macro bets. And megacap quarterly earnings due over the coming weeks will again be examined forensically for signs of a sting in the tail. The opinions expressed here are those of the author, a columnist for Reuters. -- Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. Follow ROI on LinkedIn. Plus, sign up for my weekday newsletter Morning Bid U.S. (By Mike Dolan; Editing by Lisa Shumaker)
CNET
13 hours ago
- Business
- CNET
Bracing for a Recession? These Accounts Can Keep Your Money Safe
The best place for your cash depends on what you're using it for.A recession may not be as likely as it seemed earlier this year, at least according to some forecasts. But economic uncertainty is still forcing us to be cautious about our finances. From high prices to layoffs, the big financial struggles are out of our control. However, one thing we can do to help ourselves weather the ups and downs is to make sure our money is in the right place. Keeping your cash safe can help you preserve your savings and maximize your returns, regardless of an economic downturn. But not every account is the same, and some savings strategies make more sense in the long term than in the short term. Read more: Your Recession FAQs Answered: 5 Tips to Help You Prepare, Not Panic 💵 Where to keep your spending money Rewards checking account Even if your paycheck is directly deposited into your checking account, you shouldn't keep all your money there. Your checking account funds should cover everyday spending and bills, plus a cushion for other expenses. The rest of your cash should be in an account that earns a high interest rate so it can grow. Plus, when you keep money earmarked for savings in a separate account, you're not tempted to dip into it. You can still get returns with the right checking account. Some top high-yield checking accounts offer annual percentage yields of 1% or more, far better than the near 0% you'll get with a typical checking account. Why not earn some interest on your spending money if you can? With prices high across the board, every little bit helps. 🚨 Where to keep your emergency fund High-yield savings account An emergency fund is a must-have at any time but especially when the economy is shaky. Whether you're hit with a layoff or a sudden medical bill, your emergency fund can help you avoid going into debt to cover your expenses. The best place to keep an emergency fund is in a high-yield savings account where your money is easily accessible when you need it. Unlike traditional savings accounts, top HYSAs earn annual percentage yields more than 10 times the national average, with some topping 4% APY. With a higher yield, you'll benefit from compounding interest. That's when you're not just earning interest on your initial deposit but accumulating interest on top of the interest you already earned. Your money grows faster, giving you a bigger balance to draw from when the time comes. ⏲️ Where to keep savings for short-term goals Certificate of deposit If you're saving for a goal in the near future -- like buying a car or paying for home repairs -- a certificate of deposit is a smart option. Unlike savings accounts, which have variable rates, CDs offer a fixed rate that's locked in when you open the account. That means your earnings will never drop and your returns are guaranteed, regardless of what's happening in the economy. You must keep your money in the CD for the full term to avoid early withdrawal penalties. But with terms ranging from a few months to several years, it's easy to find a CD that fits your timeline. In fact, the early withdrawal fee can discourage you from tapping into your funds before you really need them. 🗓️ Where to keep savings for long-term goals It depends The best place for long-term savings goals depends on the goal. Retirement savings are best in tax-advantaged retirement accounts (more on that below) but you have plenty of options for other goals. For example, if you're saving for your child's college fund, consider a 529 plan. These state-sponsored savings plans allow relatives and other individuals to put aside money for a child's education and come with tax benefits like tax-free withdrawals if the money is used for educational expenses. You could also consider a low-risk government-backed investment like an I bond, which can preserve your purchasing power in the face of inflation. If you're saving for a down payment on a house, consider the pros and cons of accounts like homebuyer savings accounts, high-yield savings accounts and CDs. 🧑🦳 Where to keep your retirement savings Tax-advantaged retirement funds Retirement accounts like 401(k)s and IRAs are designed to help you maximize your tax advantages. Depending on the account you choose, you'll either pay taxes now or when you withdraw the funds, allowing you to account for a potentially lower income in retirement. If your employer offers contribution matching on a retirement savings plan, it's essentially free money to boost your nest egg. While brief stock market swings can cause panic, investing is still critical for long-term financial stability. The S&P 500 has historically delivered an annual return of about 10% for investors who stick it out over decades. Instead of trying to beat the market, focus more on your ideal investing strategy. A robo-advisor can help. If you're nearing retirement age, you may want to rebalance and diversify your portfolio so more of your retirement fund is in low-risk assets like CDs or bonds.
Bloomberg
13 hours ago
- Business
- Bloomberg
Hungary's GKI Business Confidence Index Plunges to Five-Year Low
Hungary's business confidence index plunged to its lowest level in almost five years, in another sign that the economy could be on the brink of another recession. The gauge fell 2.1 points to -14.8 in July, the lowest level since June 2020, according to the GKI research institute, which compiles the data. Along with deeply pessimistic consumers, the overall economic confidence level slipped to -19.2, the worst reading since the end of 2022.
Reuters
a day ago
- Business
- Reuters
AI and gravity-defying US GDP
LONDON, July 23 (Reuters) - For the second time in three years - and straddling two separate presidencies - heightened U.S. fears of recession have proved wide of the mark. The artificial intelligence boom is once again the prime suspect. The AI explosion and arms race since the launch of OpenAI's ChatGPT in November 2022 had its own mini crisis of confidence earlier this year with the emergence of China's cheaper DeepSeek rival. But neither those doubts nor the market angst about President Donald Trump's tariff war seems to have slowed the staggering capital spend and data center building supporting the AI push. As the brave new world of generative AI enters its third year, the financial impact has expanded well beyond the share price of chipmakers, as data center construction and capex spending more broadly are flattering U.S. GDP to a remarkable degree. Carlyle's Head Investment Strategist Jason Thomas has been arguing all year that this capex spending is an effective re-industrialization of corporate America, reshaping its focus away from software and intangible assets and toward investing in plants and machinery and energy like never before. The GDP impact from that is huge. Thomas reckons the AI-related capex boom – in data centers, graphics processing units, server infrastructure, power and related hardware and applications – already accounts for more than one-third of this year's second-quarter U.S. GDP growth. And he points out that order books in the relevant industries continue to grow at annual rates of more than 40%. With Q2 GDP data due out next week expected to show annualized growth of 2.5%, that's a sizeable AI tailwind. The scale of AI-related spending that has already occurred suggests that these are not just finger-in-the-wind estimates. Spending on physical data center infrastructure alone is up fourfold from 2020 levels, offsetting weakness in other construction categories. Among AI chip giant Nvidia's (NVDA.O), opens new tab top U.S. customers, Thomas writes, capex has grown 1.5 times as fast as revenue. Property, plant and equipment now account for 70% of typical book value for these firms, up from just 20% before the GenAI scramble began. The big question remains whether AI's contribution to economic growth is now peaking - even if that's difficult to deduce given the hype and optimism around the sector and evidence of robust chip demand growth worldwide. But Morgan Stanley this week analyzed this question by considering the borrowing needed to finance the ongoing AI infrastructure and data center buildout. Analysts Vishwanath Tirupattur and Vishwas Patkar forecast roughly $2.9 trillion of additional global data center spending through 2028, comprising $1.6 trillion on chips and servers and $1.3 trillion on real estate, building costs and maintenance. For context, that suggests an annual global outlay over the next three years that's close to the $950 billion spent by all S&P 500 firms combined last year. While some of this can be funded with cash, Morgan Stanley estimates that a $1.5 trillion financing gap remains, which will have to be raised via debt, likely a mix of loans, bonds, asset-backed securities and private funding. On top of this, they reckon that investment spending related to data center construction and power generation will add up to 0.4 percentage points to U.S. GDP through this year and next. Once again, AI is helping frustrate all other macro bets. And megacap quarterly earnings due over the coming weeks will again be examined forensically for signs of a sting in the tail. The opinions expressed here are those of the author, a columnist for Reuters. -- Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. Follow ROI on LinkedIn. Plus, sign up for my weekday newsletter Morning Bid U.S.
