Japan Q3 GDP slump likely to be revised down after weak capex data

04, Dec. 2018

TOKYO, NNA – Japanese business investment and profits slowed in the July-September quarter from the previous three months, hit by heavy rains and typhoons, government data showed Monday, indicating Q3 GDP contraction may be revised down sharply.

Combined capital investment by non-financial Japanese companies rose 4.5 percent on year in July-September for the eighth straight quarterly gain, but the pace of increase decelerated from the 12.8 percent surge in April-June, according to a quarterly survey by the Ministry of Finance.

Capital outlays (excluding software) fell a seasonally adjusted 4.0 percent in Q3, marking the first quarter-on-quarter drop in five quarters after rising a revised 6.1 percent in Q2.

Japan's economy for the July-September quarter slumped 0.3 percent on quarter, or an annualized 1.2 percent, as a series of disasters dampened consumption and business investment posted the first drop in two years after surging in April-June.

It followed a strong rebound of 0.8 percent, or an annualized 3.0 percent in the second quarter from a drop of 0.3 percent, or an annualized 1.1 percent in the first three months of 2018, which was caused by severe winter weather.

In July-September, capital investment dipped 0.2 percent in payback for a sharp 3.1 percent rise in the previous quarter, marking the first quarter-on-quarter drop since -0.3% in July-September of 2016. The contribution of capex to GDP was flat with a slight negative bias (-0.0 percentage point).

The MOF survey based on the demand side is the key to calculating revisions to Q3 GDP due out on Dec. 10. Capex in preliminary GDP is based solely on supply side data.

The MOF data also showed that combined non-financial current profit rose just 2.2 percent on year in Q3 after rising 17.9 percent Q2.