Gloomy data signals Japan close to entering recession
HE September quarter, in which Japan almost certainly entered a technical recession, closed with news of the sharpest monthly decline in industrial production in seven years and worse than expected employment and household spending numbers.
"It is becoming almost consensus that the country's economy is entering a recessionary phase," said Daiwa Securities SMBC senior economist Maiko Noguchi.
"Now the focus is on the depth and the length of the phase."
The first official September quarter GDP estimates, still seven weeks away, are likely to show a second successive sharp contraction in the world's second-largest national economy, following Japan's 3 per cent annualised fall in the June quarter.
All the main August data released was significantly worse than market forecasts, painting the picture of an economy now gripped both by the slump in export demand beyond Asia and domestic demand now in fast retreat.
Japan's industrial output fell 3.5 per cent in August on the month previously, compared with the market consensus forecast of 2.9 per cent, mainlyreflecting severe demand conditions in US and European markets.
Japan last week reported a Y324 billion ($3.8 billion) merchandise trade deficit for August, the first in 26 years excluding Januaries (when exports slow seasonally). Export revenues from the US fell almost 22 per cent year on year and from the European Union by 3.5 per cent.
Although the Economy Trade and Industry Ministry's survey of manufacturers suggests a mild rebound in September, industrial output is now expected to have fallen for three successive quarters, the first time that has happened since 2001, during Japan's last recession.
The wilting of domestic demand -- never strong throughout the 2002-07 recovery cycle -- looks to be equally pronounced, on the latest household spending and employment data.
Price-adjusted monthly household spending in August fell 4 per cent, year on year, compared with the 1.3 per cent market forecast. This is an important component of domestic private consumption, which accounts for about 55 per cent of Japanese GDP.
Except for transport and communication, household spending fell in all sectors, including food where prices have been rising sharply. Average monthly household wages, however, rose slightly.
The evidence that Japanese consumers are pre-emptively tightening their belts makes the employment numbers a cause for growing concern, because they show domestic employers also cutting back on new hiring.
Headline unemployment in August reached 4.2 per cent seasonally and though it represented only a slight rise on the previous month, it was a two-year high.
More strikingly, the jobs-to-applicants ratio fell sharply again to 0.86 (100 applicants available for 86 jobs). Six months previously, the ratio was 0.95 and last year the ratio was usually above 1.
"The impact of (the) worsening economy is gradually spreading to the jobs market," Shinkin Central bank Research Institute senior economist Takumi Tsunoda told Reuters.
"Until recently, companies have been mainly cutting part-time jobs, but now they are also reducing full-time employees."
"It is becoming almost consensus that the country's economy is entering a recessionary phase," said Daiwa Securities SMBC senior economist Maiko Noguchi.
"Now the focus is on the depth and the length of the phase."
The first official September quarter GDP estimates, still seven weeks away, are likely to show a second successive sharp contraction in the world's second-largest national economy, following Japan's 3 per cent annualised fall in the June quarter.
All the main August data released was significantly worse than market forecasts, painting the picture of an economy now gripped both by the slump in export demand beyond Asia and domestic demand now in fast retreat.
Japan's industrial output fell 3.5 per cent in August on the month previously, compared with the market consensus forecast of 2.9 per cent, mainlyreflecting severe demand conditions in US and European markets.
Japan last week reported a Y324 billion ($3.8 billion) merchandise trade deficit for August, the first in 26 years excluding Januaries (when exports slow seasonally). Export revenues from the US fell almost 22 per cent year on year and from the European Union by 3.5 per cent.
Although the Economy Trade and Industry Ministry's survey of manufacturers suggests a mild rebound in September, industrial output is now expected to have fallen for three successive quarters, the first time that has happened since 2001, during Japan's last recession.
The wilting of domestic demand -- never strong throughout the 2002-07 recovery cycle -- looks to be equally pronounced, on the latest household spending and employment data.
Price-adjusted monthly household spending in August fell 4 per cent, year on year, compared with the 1.3 per cent market forecast. This is an important component of domestic private consumption, which accounts for about 55 per cent of Japanese GDP.
Except for transport and communication, household spending fell in all sectors, including food where prices have been rising sharply. Average monthly household wages, however, rose slightly.
The evidence that Japanese consumers are pre-emptively tightening their belts makes the employment numbers a cause for growing concern, because they show domestic employers also cutting back on new hiring.
Headline unemployment in August reached 4.2 per cent seasonally and though it represented only a slight rise on the previous month, it was a two-year high.
More strikingly, the jobs-to-applicants ratio fell sharply again to 0.86 (100 applicants available for 86 jobs). Six months previously, the ratio was 0.95 and last year the ratio was usually above 1.
"The impact of (the) worsening economy is gradually spreading to the jobs market," Shinkin Central bank Research Institute senior economist Takumi Tsunoda told Reuters.
"Until recently, companies have been mainly cutting part-time jobs, but now they are also reducing full-time employees."
Labels: employment, Japan
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