Thursday, 28 December 2006

Uncertainty over rate hike in Japan continues

Two days after my last post on Japan and an imminent rate hike by the BoJ looks as uncertain as ever.

Consumer spending remains weak.

Japan's retail sales shrank 0.1 percent in November from a year earlier to 10.64 trillion yen for the first decline in four months, the government said Wednesday.

The fall stemmed from slumping sales of winter clothes and heating equipment due to the mild winter, the Ministry of Economy, Trade and Industry said in a preliminary report. Lower vegetable prices also contributed to the contraction.

Falling wages aren't helping.

Japan's wages unexpectedly fell in November, adding to concern consumers won't have enough spending power to drive growth in the world's second-largest economy.

Monthly wages, including overtime and bonuses, slipped 0.2 percent to 291,392 yen ($2,450) from a year earlier, the labor ministry said today in Tokyo. The median estimate of seven economist surveyed by Bloomberg News was for wages to gain 0.2 percent. Pay for the year so far has risen less than 10,000 yen.

Industrial production has been better.

Japan's industrial production grew a seasonally adjusted 0.7 percent in November from the previous month, lifting its index to a record high, the government said Thursday.

The index of output at mines and factories came to 108.6 against the base of 100 for the year 2000, the Ministry of Economy, Trade and Industry said in a preliminary report.

The 0.7 percent increase reflects a brisk output of automobiles and mobile phone parts propelled by solid demand at home and abroad, according to METI.

The latest reading, however, fell short of an average market forecast of a 1.2 percent expansion. It followed a 1.6 percent rise in October...

Looking ahead, the ministry said manufacturers forecast a 0.7 percent rise in industrial production in December but a 0.8 percent fall in January.

Housing starts have also been good.

Housing starts in Japan rose 4.0 percent in November from a year earlier to 115,392 units for the fourth straight month of increase, the Ministry of Land, Infrastructure and Transport said Wednesday.

Speaking of housing, yesterday's numbers on US new home sales for November were also relatively encouraging. Calculated Risk looks at the numbers and discusses the outlook and the impact on GDP from mortgage equity withdrawal.

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