More gloom and doom for industrialized world

PARIS (Reuters) - From Britain to Japan, the world's wealthiest economies produced yet more evidence on Thursday that their fortunes are fading fast, and in parts furiously.

British household morale hit its lowest since the dark days of 1974 this month, according to one survey, and inflation in the 15-nation euro zone hit its fastest on record, a preliminary official estimate showed.

In Japan, manufacturing industry activity shrank for a fifth month, according to another survey report which can only compound the growing belief that the longest expansion since World War Two is coming to an abrupt end there.

"All mired in stagnation. All teetering towards the brink of recession," Holger Schmieding, an economist in London for Bank of America, said of the trend across the industrialized world.

"But there is still hope that oil prices may decline early and fast enough to save them just in time."

A gross domestic product (GDP) report from Washington later on Tuesday was expected to show U.S. economic growth picked up in the second quarter as tax rebate checks started to arrive at U.S. households as part of a government attempt to bolster a faltering economy.

The doom-and-gloom take on the outlook remained dominant despite news of yet another fall in German unemployment, which many economists said was sure to give way to less positive developments as economic slowdown fed through to labor markets.

German unemployment fell by 20,000 in July to 3.250 million, holding the jobless rate at its lowest in nearly 16 years, said the Federal Labour Office, where a dip below three million is not being ruled out in the months ahead.

EUROPE'S PAIN

News elsewhere was not even cause for temporary celebration.

In Britain, where falling house prices and rising household bills are starting to hurt hard, the GFK NOP consumer confidence index, sank to the lowest seen since the survey began in 1974, dropping five points in July to -39.

That came with more news of falling house prices.

The Nationwide building society, a lender, said house prices fell by 1.7 percent this month, leaving them 8.1 percent lower than a year ago -- the biggest annual fall since the monthly series began in January 1991.

British gas firm Centrica said this week it was raising its prices by 35 percent on the heels of EdF, which is raising them by about a fifth.

Gas prices worldwide are strongly influenced by the surge in oil prices, which have eased in recent days but still remain not far off 50 percent higher than at the end of 2007.

Fuel and higher food prices are fuelling headline inflation just about everywhere and the European Union's statistics office issued a barebones estimate for July on Tuesday which showed the annual rate of consumer price inflation edging up to 4.1 from 4.0 percent in the euro zone, a new record.

JAPAN'S TOO

Japan contributed sizeably to the economic gloom too, with a new survey of the manufacturing sector showing activity there contracted for a fifth month in July.

The Nomura/JMMA Japan Purchasing Managers Index (PMI) came a day after government data showed industrial output in April-June fell for a second straight quarter, the first such drop in seven years, suggesting that the nation's longest post-war growth cycle is fizzling out as high energy costs curtail business activity.

Analysts say Japan may soon slip into recession but say it will probably be a shallow trough.

A Reuters poll last week showed economists believe Japanese GDP contracted in the second quarter but will pick up slowly in the following July-September quarter.

Preliminary GDP data for the April-June quarter will be released on August 13, around the same time as second-quarter GDP reports for most of the euro zone, where another Reuters poll shows economists expect zero growth for the second quarter after a strong first three months, when the economy of the currency bloc grew 0.7 percent versus the preceding quarter.

The U.S. report on Tuesday was expected to show GDP grew 2 percent in American measurement in the second quarter versus the first quarter, which equated to roughly 0.5 percent in the standard European way of expressing such figures.

That, from an economy battered by a housing slump and credit crunch that have hit other parts of the industrialized world as well now, may look relatively good but economists believe it could be a short-lived improvement.

(with reporting by Yoko Nishikawa in Tokyo, Marcin Grajewski in Brussels, Christina Fincher and Matt Faloon in London, Holger Hansen and Joerg Voelkerling in Berlin; editing by David Christian-Edwards)