New York City, New York – (StockNewsDesk) – 11/17/2014 — Major indices, S&P 500 and the Down Jones, entered the negative territory after the Japan reported a negative growth for the third consecutive quarter, pushing the economy into recession. These developments came in as a surprise for the Wall Street investors. In addition to this, two important economic indicators of U.S, manufacturing index and industrial production data, came in below estimates making investors wary. On a broader bracket, stocks saw losses after four-weeks of consecutive gains.
Japanese economy shocked the Wall Street as it entered into the recession after reporting negative growth for the third quarter. Japan is facing massive economic problems, predominantly because of stagflation and deflation. The Gross Domestic Product (GDP) of Japan fell by 1.6% for the third quarter on an annualized basis compared to analysts’ expectations of a growth of 2.3%. Last quarter the GDP of the country already shrank 7.3%. Prime Minister Abe may call for a snap election and may delay its planned sales tax regime, which was due at next year. The value of Japanese Yen touched a 6-year high of 117.06 against the value of Dollar.
Japan Economy (Photo Courtesy Wikipedia)
Economic Indicators Fail to Impress
According to the New York Empire State manufacturing Index, manufacturing activity fell for third consecutive month suggesting below than expected factory orders. However, the index managed to stay in the green. The manufacturing index came in at 10.6 compared to the Street’s expectation of 11.10. However, this is well above earlier reading of 6.17. Few prominent sectors failed to meet expectations as a result of which the manufacturing index couldn’t beat expectations.
The production declined by 0.2% in comparison to earlier reading of 0.5%. Sectors such as motor vehicle output, mining output and utility’s production failed declined but a slower pace. Motor vehicle output fell 1.2% in October bettering the fall of 1.9% in September while the mining output declined 0.9%. Utility’s production fell 0.7% in October. The utilization-rate within the industrial sector declined to 78.9 from an earlier period’s reading of 79.2. All these factors combined minimized the optimism created from the increase of the manufacturing sector.
An index that measures future general business touched its highest level since January 2012 while a barometer measuring growth of capital expenditure also touched a new height in past two years. These measure points towards investment in markets which might help the country’s GDP in the times to come.