Downbeat Report on Japan’s Growth
Japan’s real gross domestic product expanded at a less-than-expected 1.7% annualized pace in the three months ended June 30, signaling that a rebound in the world’s second-biggest economy may have peaked, analysts said.
The growth rate reported by the Cabinet Office in Tokyo early today compared with a 4.2% median forecast of 32 economists surveyed by Bloomberg News and was a sharp decline from the 6.6% pace of the first quarter.
The downbeat report added to concerns about the global economy, which is facing a major headwind this summer because of soaring oil prices.
Japanese industrial production fell in June, for the first time since February, and household spending declined for a second month, government data show.
Consumer spending, which had been accelerating since last year, probably will slow further because overall wages are falling, economists said.
“Strong consumer sentiment was a key element driving spending,” said Junichi Makino, senior economist at Daiwa Institute of Research. But “job growth, which has stemmed from part-time jobs, isn’t translating into wage growth,” he said.
Total wages fell in all but three of the last 40 months through June, when they declined 2.4%.
A slide in business inventories contributed to the slowdown in growth in the second quarter, as companies reduced warehouse stockpiles.
More surprising, analysts said, was that Japanese business spending overall was flat with the first quarter.
A drop in government investment also hurt GDP. Construction orders from the public sector fell 21% in the quarter.
Slowing economic growth will make it more difficult for Japan to overcome its six-year tussle with deflation, said Yasunari Ueno, chief market economist at Mizuho Securities Japan Ltd.
European authorities are expected to announce second-quarter euro-zone economic growth today. Based on a pickup in growth in Germany and France, euro-zone real GDP probably grew at a 2.5% annual rate in the quarter, said Jacques Cailloux, an economist at J.P. Morgan Chase & Co. in London.
The U.S. economy grew at a 3% pace in the quarter.
