By Daniel Leussink
TOKYO (Reuters) – Japan’s economy expanded at a much faster-than-initially-reported pace in July-September, driven by resilient domestic demand even as exports took another hit from slowing global growth and rising trade tensions.
The quicker growth came on the back of an improvement in capital expenditure and private consumption, which both expanded in the second quarter, offsetting a hit from a decline in exports.
The economy grew an annualised 1.8% in July-September, stronger than the preliminary reading of 0.2% annualised growth, Cabinet Office data showed Monday.
The reading, which marked the fourth consecutive quarter of growth, also beat economists’ median forecast for a 0.7% gain.
The annualised growth translates into quarter-on-quarter expansion of 0.4% from April-June, compared with a preliminary reading of a meagre 0.1% gain.
Capital spending rose 1.8% from the previous quarter, higher than a preliminary 0.9% rise and outpacing the median forecast for a 1.7% increase.
Private consumption, which accounts for some 60% of gross domestic product, rose 0.5% from the previous three months, slightly better than the preliminary reading for a 0.4% gain.
Net exports – or exports minus imports – subtracted 0.2 percentage point from revised GDP growth, while domestic demand added 0.6 percentage point.
The better-than-expected GDP revision comes after exports and factory output posted their largest declines in years in October, exposing widening cracks in an economy hurt by declining demand.
The Bank of Japan could offer a bleaker assessment on factory output than in October at its rate review this month, sources with direct knowledge of the matter said.
Some analysts are worried that the jump in business and household spending before October’s tax rise bode ill for demand in the months ahead, threatening to leave the economy without a growth driver unless exports rebound.
A gloomy set of data, including worse-than-expected October household spending and retail sales figures, suggests the hit to consumption from the sales tax hike may be larger than previously thought.
Analysts already expect the economy to shrink in the current quarter due to the sales tax hike.
Japan’s cabinet approved a $122 billion fiscal package last week to support stalling growth amid the outlook risks and as policymakers look to sustain economic activity beyond the 2020 Tokyo Olympics.
(Reporting by Daniel Leussink; Editing by Sam Holmes)