Friday, November 19, 2010

Q3 - GDP results paint deceptively rosy picture

The nation's gross domestic product saw higher-than-expected growth of 0.9 percent in July-September, but that sunny figure does not reflect the rather more gloomy reality of the current economic situation.

The growth was primarily due to temporary factors, such as a last-minute rise in demand for cars before the end of government subsidies for eco-friendly models and the unusually hot summer, which drove up consumption of durable goods such as air conditioners.

The prevailing view is that the GDP will post negative growth in October-December, with private consumption falling and exports struggling due to the yen's appreciation against the dollar.

The seasonally adjusted real GDP's 0.9 percent rise in the latest quarter--or an annualized 3.9 percent--marked the fourth consecutive quarterly increase.

Nominal GDP, which reflects price fluctuations and is more in line with consumer sentiment, also rose in the last quarter, up by 0.7 percent, or an annualized 2.9 percent, for the first increase since the January-March quarter.

The consumption of durable goods rose 11.1 percent from the previous quarter, equaling the rate posted in 1989 amid the bubble economy and pushing up overall GDP by 0.6 percentage point.

Yet private consumption has been declining markedly in recent weeks. Domestic new car sales in October were up to 26.7 percent less than a year earlier.

"Our customer numbers have halved," a Tokyo auto dealership employee said.

Cigarette sales also nosedived in October, plunging by about 70 percent from a year earlier, a result attributable to bulk-buying that took place before the cigarette tax rose.

Exports, a driving force for this nation's economy, are quickly losing momentum. In July-September they rose 2.4 percent from the previous quarter, marking the sixth consecutive quarter of growth. That result is well short of the 5.6 percent growth posted in the preceding quarter, however.

While private consumption continues to struggle to sustain its own path to recovery, future prospects for exports are murkier than ever.

Many observers believe the GDP will shrink during the current quarter.

According to the average of predictions by 42 private-sector economists and organizations surveyed by the Economic Planning Association--an auxiliary organization to the Cabinet Office--this nation's GDP will contract by an annualized 0.88 percent in October-December.

http://www.yomiuri.co.jp/dy/business/T101116005392.htm

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