BERLIN: Germany and Japan, respectively the world's third and second largest advertising markets, report the cold breath of economic slowdown on their necks.
The Federal Statistics Office in Wiesbaden noted this week a fall in February's consumer spending, with retail sales (adjusted for inflation and seasonal fluctuation) down 1.6% compared with January.
German consumer prices, based on a harmonized EU mechanism, also rose 3.2% in March – beyond economists' expectations but marginally less than the 3.5% EU average which reached its highest level in almost sixteen years.
Comments Kenneth Broux, an economist at Lloyds TSB Group in London: "Inflation is eroding disposable income and outweighing the positive impact of falling unemployment."
Fingers crossed, he added: "However, inflation will come down later this year and with the German economy still in good shape, that will help kick-start consumer spending." TOKYO: Business sentiment among the larger Japanese manufacturers has fallen to a four-year low, according to a Bank of Japan survey published yesterday (Tuesday).
Local economists point to this as further evidence of a worsening economic outlook, strengthening market speculation that the central bank may cut rates later in the year.
Warns Joseph Kraft, managing director at Dresdner Kleinwort's Japanese Capital Markets: "The BOJ faces a difficult situation, with a growth slowdown coming at a time when consumer prices are rising.
"It's highly likely the BOJ will keep interest rates on hold in coming months, but this tankan suggests the probability may rise for a rate cut before the year-end if data in coming months is weak and back up the deterioration in sentiment."
Meantime, cabinet ministers remain cautious, holding to the view that the world's second-largest economy is stalling.
"I am very worried about declines in capital spending plans, particularly for big manufacturers," admitted economics minister Hiroko Ota."The key to the outlook for Japan's economy is how big and how long the US economic slowdown would be," she said.
Data sourced from Bloomberg.com (Germany) and International Herald-Tribune; additional content by WARC staff