The global economy's delicate balance was clear on Friday as data showed the slowest UK growth in three years and a 10-year inflation peak in Japan, with only a surprise rise in U.S. durable goods orders beating the gloom.
The contrasting fortunes shown by the figures pointed up the quandary facing central bankers around the world as they try to check surging inflation pressures without choking off growth.
Britain's were the first G7 GDP figures for the April-June period, and the slowdown there may be a taste of things to come as the global economy buckles under the weight of soaring oil prices and a credit crunch.
In Japan, after years of the country battling deflation, core inflation hit its highest level in more than a decade because of a huge jump in energy and processed food costs.
At the same time, exports in the trading nation fell in June for the first time in nearly five years, in another example of the toxic mix of high inflation and slow growth most developed economies are facing.
However, there were signs of economic resilience in the United States where new orders for long-lasting manufactured goods increased unexpectedly in June on a surge in defence orders, while a gauge of business investment also was higher than forecast.
Durable goods orders were up 0.8% after a revised 0.1% gain in May. Analysts polled by Reuters were expecting durable goods orders to slip 0.3%.
British GDP rose by just 0.2% in the three months to June, the weakest rate since 2005, as housebuilding slumped.
"The economy is likely to grind almost to a halt, raising the very real risk that a sharper than expected retrenchment in consumer spending could tip the economy into mild recession," said Matthew Sharratt, economist at Bank of America.
High inflation, however, is hampering the Bank of England's ability to cut interest rates. One BoE policymaker even voted for a rise in rates this month as inflation is running at nearly double the central bank's 2% target.
Most economists expect the BoE will cut interest rates next but not for a while.
NO CUTS
The Bank of Japan also looks likely to keep interest rates on hold for a while longer after it raised them to 0.5% in February last year.
Its preferred core consumer price index, which excludes fresh food products, rose 1.9% in June from a year earlier, close to the upper limit of the range described by BoJ board members as consistent with price stability.
"The further jump in inflation in June should help to kill any lingering speculation that the next move in Japanese interest rates is down," said Tehmina Khan of Capital Economics in London.
The European Central Bank hiked interest rates this month to combat inflation and Governing Council member Klaus Liebscher said on Friday it was far from ready to give the all-clear on inflation yet.
"We haven't exhausted our room for manoeuvre," Liebscher was quoted as saying by Bloomberg News on Friday.
The inflation numbers are not getting any better yet even though oil prices have fallen sharply in the last week.
German import prices posted their biggest annual rise in nearly 8 years in June, driven by a 50% rise in energy costs. Euro zone inflation hit a record high last month.
European policymakers want the U.S. Federal Reserve and China to raise interest rates to combat global inflation and curb the value of the euro which is hurting euro zone growth, European G7 sources have told Reuters.
Despite their frustration, they concede they are unlikely to get their wish.
"To curb global inflation the Fed should be raising rates," one G7 source told Reuters. "But on the other hand they have all the problems of the financial sector to worry about, and there is unlikely to be any interest rate hike before the U.S. election." The source added that China should also be raising rates.
But the overseas edition of the official People's Daily said on Friday that China should fine-tune its macro-economic policies to strike a balance between fighting inflation and preventing a sharp economic slowdown.
That was the latest indication that the debate in Beijing is over whether or not to relax tighter credit policies introduced last year.
