Service sector

Japan lowers fourth-quarter GDP due to weak service sector

  • Q4 GDP +4.6% annualized vs f’cast +5.6%
  • Private consumption revised down to +2.4%, capex at +0.3%
  • Revision reflects lower-than-expected services spending
  • War in Ukraine raises risk of contraction in first quarter – analysts

TOKYO, March 9 (Reuters) – Japan’s economic rebound was weaker than initial estimates in the final quarter of 2021, revised data showed on Wednesday, with the recovery seen in consumer and business spending weaker than expected. originally announced.

The downgraded growth is bad news for policymakers tasked with keeping the country’s fragile recovery on track, as soaring commodity prices from the Ukraine crisis and ongoing supply disruptions are worsening the crisis. economic uncertainty.

Revised gross domestic product (GDP) data released by the Cabinet Office on Wednesday showed Japan grew by an annualized 4.6% in October-December. That was below economists’ median forecast for a 5.6% gain and the preliminary reading of 5.4% released last month.

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“This suggests that Japan’s economic recovery from the pandemic is weaker than that of Europe and the United States,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

On a quarterly basis, GDP rose 1.1%, below median market expectations for a 1.4% gain.

The change was mainly due to lower private consumption, a government official told a press briefing.

Private consumption, which accounts for more than half of Japan’s GDP, rose 2.4% in October-December from the previous quarter, revised down from an initially estimated gain of 2.7%. Spending in the services sector, in particular, was reduced to an expansion of 3.1% from an initial increase of 3.5%.

Recent data from the Department of Industry for December showed spending on services such as restaurants and train journeys was weaker than the preliminary estimate based on private sector figures, the official said.

“Private consumption was probably quite weak in January, due to weak spending on capital goods such as cars and services,” Minami said, adding that further uncertainties around Ukraine are dampening government investment. companies.

In the fourth quarter, capital spending rose 0.3%, below economists’ forecast for a 0.7% gain and a preliminary figure of a 0.4% advance.

While data from earlier this month showed strong business spending in the fourth quarter, revised GDP figures reflected weakness in things like software investment, the official said. Read more

Overall domestic demand contributed 0.9 percentage points to the revised GDP figures, while net exports added 0.2 percentage points.

Economists in a Reuters poll last week forecast annualized growth of 0.4% in the January-March quarter, lowering previous projections given infections of the Omicron variant of the coronavirus and uncertainties caused by the war in Ukraine. Read more

Yusuke Shimoda, senior economist at the Japan Research Institute, said he still expects growth to be positive in the first quarter.

“But it’s still early March,” he added. “Further downside risks cannot be ruled out based on Russia’s actions.”

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Reporting by Kantaro Komiya and Daniel Leussink; Editing by Sam Holmes

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