The Japanese economy shrank slightly faster than initially reported in the third quarter, as a sharp rise in local COVID-19 cases hit private consumption and a global chip supply shortage hurt corporate sentiment.
The economy declined an annualized 3.6 percent from July to September, revised Japanese Cabinet Office data showed yesterday, worse than the preliminary reading of a 3 percent contraction.
The data, which was worse than economists’ median forecast of a 3.1 percent drop, equals a real quarter-on-quarter contraction of 0.9 percent from the prior quarter, versus a preliminary decline of 0.8 percent.
“This confirms that economic conditions were stagnating in the July-September quarter,” Itochu Economic Research Institute chief economist Atsushi Takeda said. “Growth turned negative due to the resurgence of the coronavirus.”
The faster decline was mainly due to a larger fall in private consumption, which makes up more than half of GDP, and shrank 1.3 percent from the previous three months, worse than the initial estimate of a 1.1 percent drop.
Consumption fell as bad weather kept shoppers at home, and a global chip shortage hit sales of vehicles and electronics due to production snags, a government official said.
Durable goods spending posted its biggest drop since 1994, when comparable data first became available, the official said, slumping 16.3 percent quarter-on-quarter and pulling down household consumption by 0.7 percentage points.
The data showed public investment dropped 2 percent versus the initial estimate of a 1.5 percent decline, while capital spending saw a smaller fall, shrinking 2.3 percent from the prior quarter, compared with a 3.8 percent preliminary drop.
The net contribution of exports to the GDP change was zero, offset by imports. Meanwhile, domestic demand pulled GDP down by 0.9 percentage points, matching a preliminary contribution.
The GDP downgrade, which took into account a change in the way seasonal adjustments were calculated, comes after data on Tuesday showed household spending fell for a third straight month in October.
Since the start of the COVID-19 pandemic, the Japanese government has sought to support the fragile economy by large-scale fiscal spending. It unveiled a record US$490 billion package last month.
Analysts are hopeful spending would pick up due in part due to that spending package, with Daiwa Institute of Research economist Wakaba Kobayashi seeing positive impact from the first quarter of next year.
“We expect the stimulus package to boost Japan’s GDP by around 2 percent, by pushing up private consumption, government spending and public investments,” she said.
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