Thursday, 9 June 2011

Japan confirms first quarter GDP contraction

Japan's first quarter GDP was only revised slightly. Reuters reports:

Japan's gross domestic product (GDP) shrank 0.9 percent in January-March from the previous quarter, revised Cabinet Office data showed on Thursday, unchanged from the preliminary figure despite a bigger drop in corporate capital spending than initially estimated in the wake of the March earthquake...

It translated into an annualised contraction of 3.5 percent in real, price-adjusted terms, against an initial reading of 3.7 percent of contraction and economists' forecast of a 3.0 percent decline.

Data on Wednesday had indicated that the second quarter is looking somewhat better for the Japanese economy. Reuters reports:

Japan's current account surplus fell less than expected in April from a year earlier, fuelling further hopes for an early economic recovery as manufacturers restore lost production and mend supply chains after the March disaster...

Japan's current account surplus fell 69.5 percent in April from a year earlier, Ministry of Finance data showed, less than the median forecast for an 84.3 percent annual decline, although exceeding the 34.3 percent annual drop in March.

The surplus stood at 405.6 billion yen ($5 billion), nearly double the median forecast of 210 billion yen, as big gains in dividend income from abroad more than offset deficits in trade of goods and services.

Outstanding loans held by Japanese banks inched down 0.7 percent in May from a year earlier, central bank data showed. Lending fell for an 18th straight month, but the decline slowed, suggesting the March earthquake and tsunami supported corporate demand for funding.

And Japan's service sector sentiment improved again in May. Again from Reuters:

Japan's service sector sentiment index rose to 36.0 in May, a Cabinet Office survey showed on Wednesday, continuing its gradual recovery from a record fall posted in March, helped by efforts to mend damage caused by an earthquake, tsunami and subsequent nuclear crisis.

The survey of workers such as taxi drivers, hotel workers and restaurant staff -- called "economy watchers" for their proximity to consumer and retail trends -- showed their confidence about current economic conditions climbed from 28.3 in April...

The outlook index, indicating the level of confidence in future conditions, was at 44.9, up from 38.4.

The eurozone's first quarter growth was unchanged at 0.8 percent in the latest estimate released on Wednesday but the second quarter may have started much weaker, at least for its biggest economy. Bloomberg reports that German industrial production fell in April.

German industrial production unexpectedly declined for the first time in four months in April, led by a drop in construction output.

Production fell 0.6 percent from March, when it rose a revised 1.2 percent, the Economy Ministry in Berlin said today. Economists had forecast a gain of 0.2 percent, the median of 36 estimates in a Bloomberg News survey showed. In the year, production rose 9.6 percent when adjusted for working days.

There was also a fall in German exports. The Telegraph reports:

German exports recorded its biggest drop in more than two years in April.

Seasonally adjusted exports fell by 5.5pc from the previous month - the biggest decline since a 6.5pc drop in January 2009 - while imports declined by 2.5pc, the national statistics office said in a statement on Wednesday.

Meanwhile, the Fed's Beige Book suggests that the US economy has also slowed. Reuters reports:

Growth slowed in some U.S. regions during May as costlier food and energy as well as supply disruptions stemming from a major earthquake in Japan in March took a toll, the Federal Reserve said on Wednesday.

"Reports from the 12 Fed districts indicated that economic activity generally continued to expand since the last report, though a few districts indicated some deceleration," the U.S. central bank's periodic "Beige Book" summary said.

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