Japan's economy falls faster than expected on consumption, capex hit

[TOKYO] Japan's economy contracted in the third quarter, data showed on Monday, as global supply disruptions and a resurgence in Covid-19 cases took a heavy toll on business spending and consumption.

Many analysts expect the world's third-largest economy to rebound in the current quarter as consumer spending and output pick up after the health crisis eases in Japan and across Asia.

The economy shrank an annualised 3.0 per cent in July-September after a revised 1.5 per cent gain in the first quarter, preliminary gross domestic product (GDP) data showed, compared with a median market forecast for a 0.8 per cent contraction.

The weak GDP contrasts with that of other advanced nations such as the United States, which saw its economy expand 2.0 per cent in the third quarter on strong pent-up demand.

On a quarter-on-quarter basis, GDP fell 0.8 per cent compared with market forecasts for a 0.2 per cent decline, the data showed.

Consumption dropped 1.1 per cent in July-September from the previous quarter after a 0.9 per cent gain in April-June.

Capital expenditure also decreased 3.8 per cent after rising a revised 2.2 per cent in the previous quarter, the data showed.

Domestic demand shaved off 0.9 per cent point to GDP growth.

Exports lost 2.1 per cent in July-September from the previous quarter in a sign the global recovery continued to support the economy.

Analysts polled by Reuters expect Japan's economy to expand an annualised 5.1 per cent in the current quarter, as consumer activity and auto output pick up thanks to a drop in Covid-19 cases and easing supply disruptions.

Japanese firms still face risks from higher commodity costs and supply bottlenecks such as the global chip shortage, which threatens to undermine the economic outlook over the short- to mid-term.

REUTERS