Japan's economy likely shrank in Q3 on weak consumption, output: poll

[TOKYO] Japan's economy likely contracted in the third quarter as curbs to contain Covid-19 infections and supply constraints hit consumption and output, a Reuters poll showed, underscoring the slow pace of recovery from the pandemic's damage.

While analysts expect growth to rebound in the current quarter, the weak data would reinforce expectations Japan will lag other countries in withdrawing crisis-mode stimulus steps.

The world's third-largest economy likely shrank an annualised 0.8 per cent in July-September after expanding 1.9 per cent in the previous quarter, due largely to an expected 0.5 per cent slump in consumption, according to analysts polled by Reuters.

External demand neither contributed nor shaved off gross domestic product (GDP) and capital expenditure shrank 0.6 per cent from the previous quarter, the poll showed, a sign corporate activity may be losing momentum after having served as a driver of growth.

"Consumption, capital expenditure and exports likely all fell in a sign Japan's economy continued to slump," said Saisuke Sakai, senior economist at Mizuho Research and Technologies.

"Service spending will recover as vaccinations proceed. But fears over another wave of infection could weigh on consumption next year, adding to headwinds such as the prolonged impact of chip shortages and worsening terms of trade," he said.

The government will release preliminary third-quarter GDP data at 8.50 am on Nov 15 (2350 GMT, Nov 14).

Japan's economy emerged from last year's initial hit from the pandemic thanks to robust global demand. But a string of emergency curbs to combat the pandemic weighed on consumption and delayed a sustained recovery in growth.

While the Sept 30 lifting of curbs is expected to prop up consumption, chip shortages, rising raw material costs and supply chain disruptions have hit output and exports.

Separate data is likely to show Japan's annual wholesale inflation hit 7.0 per cent in October, exceeding 6.3 per cent in September, in a sign rising raw material costs are hurting corporate margins.

The Bank of Japan will release the wholesale price data at 8.50 am on Nov 11 (2350 GMT, Nov 10).

REUTERS