(Bloomberg) — Japan’s economy sank last quarter into a recession that’s likely to deepen further as households limit spending to essentials and companies cut back on investment, production and hiring to stay afloat amid the coronavirus pandemic.
Gross domestic product shrank an annualized 3.4% in the three months through March from the previous quarter, the Cabinet Office reported Monday. The economy also contracted sharply in the final three months of last year, hit by a sales tax hike and a destructive typhoon.
Economists had forecast a 4.5% fall, as the start of social distancing last quarter crimped consumer spending, while supply-chain disruptions and sliding exports hurt manufacturers.
Key Insights
Monday’s data confirm that the world’s third-largest economy fell into a recession even before Prime Minister Shinzo Abe’s April declaration of national emergency. Analysts see a 21.5% contraction this quarter, a record for official data going back to 1955.
Barely two weeks after parliament passed a first extra budget, Abe last week called for a second that’s expected to provide rent support for small businesses and bigger subsidies for firms that don’t fire workers. Existing stimulus, including spending on cash handouts to households, already totals more than 20% of GDP.
Business is just starting to reopen in Japan’s less-urban prefectures, where a drop in infection cases allowed the state of emergency to be lifted last week. But commerce is still largely frozen in economic centers like Tokyo and Osaka, which could remain under heavier restrictions through the month.
Demand for Japanese exports is likely to stay depressed for a long time because, even though U.S. President Donald Trump and other leaders are debating how to reopen their economies, progress is likely to come in fits and starts.
On the domestic side, spending isn’t likely to pickup quickly even after the state of emergency is lifted everywhere as people are likely to remain wary of venturing out and households may tighten their purse strings in response to lost income and a more precarious job market.
What Bloomberg’s Economist Says
“Beyond 1Q, high-frequency indicators suggest the pace of contraction deepened in 2Q, as the state of emergency declared in early April walloped activity. Spending might find some support, as households start to receive the 13 trillion yen in paychecks from the government this month.”
–Yuki Masujima, economist
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On a non-annualized basis, the economy shrank 0.9% from the fourth quarter. Economists projected a 1.1% contraction.
Business investment fell 0.5%, compared with a forecast for a 1.5% drop.
Private consumption slid 0.7%, versus a projected 1.6% fall.
Net exports shaved 0.2 percentage point off non-annualized GDP.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
