And with weaker-than-expected industrial production in June, the recovery in the world’s third-largest economy could be slower than expected.
Japanese GDP declined by 7,8% during the April-June quarter, as the pandemic lockdown hit growth. This wipes out all the growth achieved since 2011:
A Cabinet Office official told the Japan Times that it was the worst crisis since modern archives began in 1955! This is certainly the worst since the current data set began in 1980.
The GDP report painted a now familiar picture: Household spending plummeted as shops closed and workers stayed at home, while the manufacturing sector was hammered by falling global trade.
Like my colleague Alison Rourke reports:
Private consumption, which accounts for more than half of the Japanese economy, fell 8.2% for the quarter, more than analysts’ forecast of a 7.1% decline. Capital spending fell 1.5% in the second quarter, less than the median market forecast for a decline of 4.2%.
External demand, or exports minus imports, slashed GDP by 3.0 percent as the pandemic dampened global demand, the data showed.
Economists of course expected a sharp drop in GDP. They also expected a rebound as the lockdown eased… ..but industrial production only rose 1.9% in June – below the expected 2.7% jump, after plunging 8% , 9% in May.
This hit sentiment in Tokyo, where the Nikkei fell 192 points or 0.8% to 23,096.
European markets are also expected to be subject today, after slipping on Friday when the UK imposed new quarantine restrictions on France.
Michael Hewson of CMC Markets detects “growing nervousness” in the markets as economies are reaching the limits of what they can do, without increasing the risk of another surge in Covid cases.
Asian markets started the week on a mixed note with the latest Japanese Q2 GDP figures showing the world’s third-largest economy contracted -7.8%, with private consumption slipping -8.2%, both more than expected. In an even more worrying development, industrial production in June only returned to a modest 1.9%, well below expectations of 2.7%, and pointing to a weak recovery towards the end of Q2, as we we turn to T3.
As such, European stock markets also appear poised to open on a mixed note with no clear sense of direction.
This morning we will hear from the German Bundesbank – how does it see the recovery going? Plus, we’re getting new industrial production and housing data from America, which could show how the U.S. economy is doing as the election race heats up.
- 11 a.m. BST: monthly report from the German Bundesbank
- 1:30 p.m. BST: Empire State Investigation into New York State Manufacturing
- 3 p.m. BST: NAHB index of the US real estate market