Japan Q3 Growth Seen Stalling as Consumer Spending Slips

Japan’s economy is forecast to have barely grown in the July-September quarter, with private consumption expected to fall, according to a Reuters poll of 16 economists. Reuters reported that the median forecast points to annualised growth of 0.3%, down sharply from 1.4% in April-June.

The Cabinet Office is scheduled to release the preliminary third-quarter gross domestic product data on Monday, November 16, at 8:50 a.m. Japan time, according to its release schedule.

On a quarter-on-quarter basis, the Reuters poll expects growth of 0.1%. That would still mark a fourth straight quarter of expansion. A separate consensus compiled by Mace News also put the median at 0.1%, with forecasts ranging from a 0.1% contraction to 0.4% growth. Mace News said annualised estimates ranged from minus 0.3% to plus 1.5%, while year-on-year growth was seen at 1.2%, up from 0.9% in the previous quarter.

Consumer spending seen slipping

Private consumption is expected to have dropped 0.2% from the previous quarter, after being flat in April-June. Reuters described it as the first contraction in seven quarters, while Mace News called it the first drop in 10 quarters. Mace News said consumption accounts for about 55% of domestic output.

Analysts at SMBC Nikko Securities said in a note that service consumption was firm in the quarter, but durable goods spending contracted because of policy-related factors.

Mace News said durable goods were hit by a pull-back after strong demand in April-June, when car purchases rose following tax cuts and air-conditioner sales surged ahead of stricter efficiency standards due in April 2027. It added that rainstorms, cold weather and natural disasters, including earthquakes in Kumamoto and heavy rain in Chiba, may also have weighed on activity.

Business investment and trade

Capital expenditure is forecast to have rebounded 1.5%, after falling 0.9% in the previous quarter. Mace News said continued demand linked to artificial intelligence development is expected to support business investment.

Net external demand is seen subtracting 0.4 percentage point from growth, after adding 0.5 point in April-June. Analysts cited by Reuters said rising imports, reflecting progress in alternative crude oil procurement, likely pushed external demand into negative territory.

Mace News also expects public investment to fall 2.0%, a second straight decline, while domestic demand is seen contributing 0.4 point to growth.

What’s next

Reuters said economic growth is among the factors the Bank of Japan will weigh as it considers further rate hikes, with many analysts expecting the next increase as soon as next month. The central bank’s policy rate currently stands at 1.25%, according to Reuters.

The Cabinet Office is due to publish its second preliminary estimate for July-September on December 8, according to its schedule.

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