By Max Sato
(MaceNews) – Japan’s gross domestic product for the July-September quarter is forecast to post a sharp slowdown, up just 0.2% on quarter, or an annualized 0.6%, as consumers remained frugal amid high costs for necessities that were aggravated by a rare, acute rice supply shortage and business investment is believed to have declined.
The expected sluggish growth follows a strong 0.7% rebound (annualized 2.9%) in the April-June quarter, which was led by private consumption, which accounts for about 55% of the GDP, and solid corporate capital investment. In the January-March quarter, the economy slumped 0.6% (annualized 2.4%) for the first contraction in two quarters, hit by suspended output at Toyota group factories over a safety test scandal that had a widespread impact beyond the auto industry.
The Cabinet Office will release preliminary GDP data for the third quarter of 2024 at 0850 JST on Friday, Nov. 15 (2350 GMT/1850 EST Thursday, Nov. 14).
Domestic demand is expected to add a slight 0.1 percentage point to total domestic output in Q3 after boosting the Q2 GDP by 0.8 point while external demand (exports minus imports) is also seen lackluster, adding just 0.1 point for the first rise in three quarters after trimming Q2 GDP by 0.1 point.
Looking ahead, the economy in October-December is expected to show only modest growth as many households are struggling to make ends meet amid high costs for food and fuels even though large firms are raising wages to cope with widespread labor shortages. Firms may increase investment in capacity in Q4 compared to Q3.
From a year earlier, the economy is forecast in the third quarter to have posted its first increase in three quarters, up 0.3%, after falling 1.0% previously.
Consensus forecasts for key components in percentage change on quarter except for private inventories and net exports, whose contributions are in percentage points. Figures in the previous quarter are in parentheses:
Private consumption +0.2% 2nd straight rise after 4 drops (+0.9%)
Business investment -0.3%, 3rd drop in 5 quarters (+0.8%)
Public investment plus -0.8%, 4th drop in 5 quarters (+4.1%)
Private inventories 0.0 point, flat after 4th drop in 5 quarters (-0.1 point)
Net exports (external demand) +0.1 point, 2nd rise in 5 quarters (-0.1 point)
Domestic demand +0.1 point, 2nd straight rise after 4 drops (+0.8 point)