Economy in Brief

Consumer confidence in Japan in April slipped for all households as well as for the two-person household measure. The index level is now the weakest it's been since early-2023 with the all-household measure at an 8.2 percentile standing on data back to 2004 and the two-person household measure in about the same place, at its 9.4 percentile standing on data back to 2004. Consumers in Japan in April suddenly pulled back their expectations and significantly reduced their confidence.

The overall livelihood measure in April fell to 27.4 from 30.9 in March and an even higher level in February. Income growth slipped to 37.5 after reaching 38.9 in March and being higher still in February. Employment slipped quite sharply to 36.2 from 40.0 in March and from a slightly higher reading in February. People's willingness to buy durable goods fell to 24.2 from 27.4 in March. The March level was slightly higher than the reading in February; the decline in confidence also corresponded to a decline in the value of assets respondents hold; that reading fell to 34.3 from 40.7 in March and from 42.9 in February. Perhaps a good part of the degradation and expectations has to do with this drop in the value of assets.

On going drops- sharp declines in train Looking at changes across periods of three, six and 12 months, we see declines on all horizons for the all household and the two-person household measures. In fact, all of the components are consumer confidence our net lower over three months, six months and 12 months.

The declines month-to-month were extremely sharp. Over the last 253 months (over 21 years), the monthly drop in asset values has been sharper only once. The drop in the livelihood measure has been sharper only six times. The monthly drops are bottom ten events by count except for income growth and employment that are bottom 22 and 13 events, respectively. The headline drops are bottom ten ranking drops month-to-month as well.

Weak standings as well as sharp drops The rankings for the consumer confidence components are uniformly low. The strongest ranking is for employment that has a 24.5 percentile standing, in the lower quarter of its range. Income growth has a 20.4 percentile standing, at the border of the lower one-fifth amidst a historic range values. The value of assets has a 6.1 percentile standing with the willingness to buy durable goods at a 3.3 percentile standing; the overall livelihood metric has a 1.6 percentile standing.

Against this background, the standing for the overall confidence index is at its 8th or 9th percentile depending on which of the two overall measures you prefer to emphasize. Clearly the weakness in the survey is throughout the survey. As is the case with surveys in the United States, in Japan the relative strongest readings are for employment, that helps to hold the overall measure from getting as weak as some of its other components weaken. Since employment is an extremely important metric in consumer confidence, its stability helps to stabilize the overall measure. However, for Japan the employment metric, while the strongest of the lot, is still quite weak in the lower 1/4 of its historic ranking and data since 2004.

EMU pace steps up- Growth in the European Monetary Union has stepped up in the first quarter of 2025 to a 1.4% annualized pace after slipping into a 1% growth rate in the fourth quarter of 2024. Year-over-year European Monetary Union growth at 1.2% is the same as it was in the fourth quarter of 2024.

Across the Euro Area- EMU growth as well as across the returns of the early reporters of GDP; there are seven countries that have reported GDP for early release. We see deceleration in growth in Ireland, the Netherlands, and Spain. However, some these are impressive decelerations! In the case of Ireland growth decelerates to a 13.5% annualized rate in Q1 from 15.3% in Q4; even in Spain the deceleration is from a 2.9% pace in the fourth quarter to a 2.3% pace in the first quarter. The final deceleration is from the Netherlands from a 1.1% growth rate in the fourth quarter to a 0.4% annual rate in the first quarter.

Sometimes, small is good Further parsing the growth rates, the four largest European Monetary Union economies (Germany, France, Italy, and Spain) continue to struggle. The weighted average growth rate for the four-largest economies is 1% in the first quarter; that is an improvement from 0.2% in the fourth quarter of 2024, and compares to 1% in the third quarter of last year as well. The first quarter year-over-year growth rate for Big-Four is 0.7%, the same as it was in the fourth quarter of 2024 (0.8% in Q3 and Q2 of 2024). There is not much change in Big-Four economy growth over the past year. For the rest of the European monetary union growth, quarterly growth decelerated in the first quarter to 2.6% from a very firm 3.2% in the fourth quarter, but even that had been a deceleration from the 3.5% annual rate in the third quarter of 2024. The rest of the monetary union posted a growth rate measured year-over-year of 2.6% in the first quarter compared to 2.3% in the fourth quarter and 1.4% in the third quarter of last year. The smaller economies are making growth progress. It is the large economies in the monetary union that are struggling the most and that are dragging down the growth rate for the monetary union.

Growth rate rankings- If we rank the growth rates of the European monetary union and the early individual reporters on year-over-year growth and on data back to 1977, we see that the monetary union itself has a growth ranking in the first quarter in its 37th percentile; a 50% ranking would put it at its median for that period- it is short of that. Above-median growth is registered in Ireland with an 89% standing, and in the Netherlands with the 62-percentile standing. Spain also has an above-median result with a 56.5 percentile standing; the rest of the countries are below 50% with Italy the closest to its median at a 47.8 percentile standing. Germany has a 20.7 percentile standing, France had a 26.1 percentile standing, Belgium is at a 29.3 percentile standing. The four largest monetary union economies grouped together have a growth rate with a 26.1 percentile standing while the rest of the monetary union logs of growth rate with a 59.8 percentile standing, significantly above the median of 50%.

A steep step-back for the U.S. This step-up in growth comes as the U.S. is running out of steam. The U.S. growth rate for the first quarter sank to -0.3% (q/q s.a.a.r.) largely on strong imports, substantially because of pending U.S. tariff policy and goods trying to get in under the wire before the bell tolls for tariff-time (imports subtract from GDP). This was a sharp deterioration from a 2.4% growth rate in Q4 2024 and 3.1% in Q3 2024. The U.S. has a 2.1% growth rate year-over-year, still relatively enviable by the standards of the monetary union members. Still, that quarter-to-quarter drop in the pace of growth from Q4 2024 to Q1 2025 has been weaker since Q1 2022.