Top Global Economies Fall Behind America --- U.K. and Japan echo weak conditions in much of continental Europe and China

"Economies in the U.K. and Japan shrank at the end of last year, underlining the widening gulf between robust growth in the U.S. and more anemic conditions in the rest of the world.

The decline in activity in Japan came as a surprise to economists and means that it has slipped in the global rankings of the world's largest economies behind Germany and into fourth place.

In the U.K., the economy shrank for the second consecutive quarter, the shorthand definition of a recession. Gross domestic product fell at an annualized rate of 1.4% in the final three months of 2023, compared with a 3.3% increase in the U.S. during the same period, the U.K.'s statistics agency Thursday said.

U.K. consumer spending, the main driver of the nation's economy, fell during the second half of 2023 even as wage growth outpaced inflation for the first time in two years, boosting consumers' purchasing power. Japanese consumers, who are still seeing prices rise faster than wages, also cut their spending in the final quarter.

The growth numbers from the U.K. and Japan mirror similarly weak conditions in much of continental Europe and China.

The divergence between the U.S. and the rest of the rich world is in large part a story of surprising U.S. strength.

 The U.S. grew much faster than economists expected it would at the start of 2023, while Europe was badly hit by high energy prices from the Ukraine conflict and rising interest rates. 

Economists forecast the growth gap will narrow somewhat during the course of the year, but remain wide.

U.S. consumer spending has been more resilient as interest rates have risen than in other parts of the world. Government spending in the U.S. also has remained at historically high levels for periods outside of recessions, giving the economy an added boost.

The Organization for Economic Cooperation and Development earlier this month said it expects the U.S. economy to grow by 2.1% this year, while it sees the U.K.'s economy growing by 0.7% and Germany's economy by 0.3%.

To be sure, the declines in activity in Europe and Japan have been relatively modest, and are a reflection of slow-growing economies that by nature fall into contraction more often than those that have a higher sustained level of growth.

And while economic output declined in several wealthy countries as 2023 drew to a close, job markets in Europe and Japan remained tight, as they were in the U.S. As a result, many economists hesitate to describe the U.K. and Japanese downturns as full-blown recessions.

Policymakers expect economies to improve as inflation ebbs in the coming months.

"We're seeing some signs of a pickup," Bank of England Gov. Andrew Bailey told lawmakers Wednesday.

Japan's unemployment rate fell to an 11-month low in December, and the Bank of Japan's Tankan survey "showed that business conditions across all industries and firm sizes were the strongest they've been since 2018."

Many economists expect the Bank of Japan to end its policy of negative short-term interest rates in either March or April, although the bank hasn't confirmed that.

"We doubt that today's GDP figures will prevent the Bank [of Japan] from ending negative interest rates in April," said Marcel Thieliant, head of Asia-Pacific at Capital Economics." [1]

The bigger picture is important. U.S. government spending is mostly subsidies sucking private investment into America's renewable economy of the future from all the world.  This might entrench the differences of today for a long time. Some who were rich, will be poor.

1. World News: Top Global Economies Fall Behind America --- U.K. and Japan echo weak conditions in much of continental Europe and China. Kirby, Joshua; Hannon, Paul.  Wall Street Journal, Eastern edition; New York, N.Y.. 16 Feb 2024: A.8.