Growth driven by rise in private consumption following the lifting of pandemic curbs in March.
Japan’s economy grew an annualised 2.2 percent in the second quarter, as robust private consumption provided a boost to the country’s long-delayed recovery from the COVID-19 pandemic.
The relatively strong economic data released on Monday comes after gross domestic product (GDP) grew just 0.1 percent during the January-March period.
The growth was driven largely by a 1.1 percent rise in private consumption, which accounts for more than half of Japan’s GDP, as dining out, leisure and travel rebounded following the lifting of pandemic curbs in March.
The latest results mean Japan’s 542.12 trillion yen ($4.07 trillion) economy is now larger than it was before the pandemic hit.
The world’s third-largest economy, however, still faces an uncertain road to recovery amid slowing global growth and rising inflation, supply chain constraints, a weakening yen, and a resurgence in domestic COVID-19 infections, which have topped 200,000 daily cases in recent weeks.
In July, the International Monetary Fund cut Japan’s growth outlook for 2022 to 1.7 percent, down from 2.4 percent in April.
Japan’s economic recovery from the pandemic has lagged other countries due to weak consumption, which has been exacerbated by ongoing border controls and domestic pandemic restrictions that continued until March.
The weak recovery has turned the Bank of Japan into a global outlier, with it sticking to an ultra-loose monetary policy as other central banks raise rates to tame rising inflation.
(Bloomberg) — Chile’s economy unexpectedly posted a full-year gain for 2023 as upward revisions offset a weak fourth quarter, when a drop in mining compounded the drag from high interest rates and uneven demand.
Gross domestic product rose 0.1% in the October-December period compared with the prior three months, less than the 0.2% median estimate from analysts in a Bloomberg survey, according to the central bank. Revisions to third-quarter growth however meant the economy expanded 0.2% last year, outperforming the median forecast of economists polled by Bloomberg for a drop of 0.1%.
The report represents mixed news for President Gabriel Boric who is trying to turn the page on last year’s weak growth caused by factors including the highest interest rate in over two decades and subdued confidence. Signs including rising energy consumption and a recent increase in retail sales indicate the economy may be turning the corner. Analysts surveyed by Bloomberg see Chile expanding faster than the Latin American average in 2024.
What Bloomberg Economics Says
“Chile’s fourth-quarter GDP data showed weak growth and falling domestic demand — below central bank forecasts and consistent with a widening negative output gap. The print supports the central bank’s quick rate cuts and dovish tone late last year and early in 2024. Leading indicators this year point to a strong rebound in 1Q, with activity rising above central bank projections.”
— Felipe Hernandez, Latin America economist
— Click here for full report
Mining output dropped 2.9% in the fourth quarter compared with the prior three-month period, the central bank reported. The rest of the economy rose 0.6%.
Growth prospects are getting a boost from the central bank’s interest rate reductions, which have shaved 400 points from borrowing costs since late July. Annual inflation is seen slowing toward the 3% target in coming months.
Read more: Chile Rate Cut Bets Shift Again With Smaller Reduction Now Seen
Chile’s government is more optimistic than many private-sector economists in expecting GDP to expand 2.5% in 2024. A recovery in growth will help improve the business environment as the government lures investments in sectors such as lithium, Economy Minister Nicolas Grau said in a March 14 interview.
Still, the administration has made little headway on key reforms, prolonging doubts for investors over possible tax and pension changes.
For millions of common citizens, the real economy remains stuck. There are so many apartments sitting empty in Chile that the government is considering stepping in to buy some, and unemployment is running at 8.4%, well above the pre-pandemic levels near 7%.
Read more: Homes That Buyers Won’t Touch Show Deepening Crisis in Chile
–With assistance from Giovanna Serafim.
(Updates with economist quotes in fourth paragraph)
Economists expect inflation reaccelerated to 3.1% in February
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People banking on an interest rate cut may not like the direction Canadian inflation is heading if analyst expectations prove correct.
Bloomberg analysts expect inflation to reaccelerate to 3.1 per cent in February when Statistics Canada releases its latest consumer price index (CPI) data on Tuesday, following a slowdown to 2.9 per cent year over year in January.
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Article contentArticle contentCPI core-trim and core-median, the measures the Bank of Canada is most focused on, are forecast to come in unchanged from the previous month at 3.3 per cent and 3.4 per cent, respectively.
Policymakers made it clear when they held interest rates on March 6 that inflation remained too widespread and persistent for them to begin cutting.
Here’s what economists are saying about tomorrow’s inflation numbers and what they mean for interest rates.
‘Can’t afford missteps’: Desjardins Financial
The Bank of Canada’s preferred measures “have become biased,” Royce Mendes, managing director and head of macro strategy, and Tiago Figueiredo, macro strategist, at Desjardins Financial, said in a note on March 18, “likely overestimating the true underlying inflation rate.”
They estimated the central bank’s preferred measures of core-trim and core-median inflation are overemphasizing items in the CPI basket of goods whose prices are rising more than five per cent. After adjusting for the “biases,” they estimate the bank’s measures are more in the neighbourhood of three per cent — which is at the top of the bank’s inflation target range of one to three per cent.
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Article content“If the Bank of Canada ignores our findings, officials risk leaving monetary policy restrictive for too long, inflicting unnecessary pain on households and businesses,” they said.
Markets have significantly scaled back their rate-cut expectations based on the central bank’s previous comments. Royce and Figueiredo are now calling for a first cut in June and three cuts of 25 basis points for the year.
“Given the tightrope Canadian central bankers are walking, they can’t afford any missteps,” they said.
‘Inflict too much damage’: National Bank
The danger exists that interest rates could end up hurting Canada’s economy more than intended, Matthieu Arseneau, Jocelyn Paquet and Daren King, economists at National Bank of Canada, said in a note.
“As the Bank of Canada’s latest communications have focused on inflation resilience rather than signs of weak growth, there is a risk that it will inflict too much damage on the economy by maintaining an overly restrictive monetary policy,” they said.
They argue there is already plenty of evidence pointing to the economy’s decline, including slowing gross domestic product per capita, which has fallen for six straight quarters. The jobs market is also on the fritz with the private sector having generated almost no new positions since June 2023, they added.
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Article content“Moreover, business survey data do not point to any improvement in this area over the next few months, with a significant proportion of companies reporting falling sales and a return to normal in the proportion of companies experiencing labour shortages,” the economists said.
Despite all these signs of weakness, inflation is stalling, they said, adding it is being overly influenced by historic population growth and the impact of housing and mortgage-interest costs.
The trio expect very tepid growth for 2024 of 0.3 per cent.
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Rising gas prices: RBC Economics
Higher energy prices likely boosted the main year-over-year inflation figure to 3.1 per cent in February, Royal Bank of Canada economists Carrie Freestone and Claire Fan said in a note.
Gasoline prices rose almost four per cent in February from the month before. But the pair believe a weakened Canadian economy and slumping consumer spending mean “price pressures in Canada are more likely to keep easing and narrowing (to fewer items in the CPI basket of goods).
China’s strong factory output and investment growth at the start of the year raised doubts over how soon policymakers will step up support still needed to boost demand and reach an ambitious growth target.
Industrial output rose 7% in January-February from the same period a year earlier, the National Bureau of Statistics said Monday, the fastest in two years and significantly exceeding estimates. Growth in fixed-asset investment accelerated to 4.2%, strongest since April. Retail sales increased 5.5%, roughly in line with projections.