The government believes the economy is “further deteriorating” due chiefly to larger falls in exports and output plus a dip in investment.

The downgraded view of the economy — the first in two months — came in the government’s monthly report for August, released Friday.

The report adds “further” to last month’s view that the economy is deteriorating, referring both to the continuation and depth of deterioration first acknowledged in June, said Haruhito Arai, director for economic analysis at the Cabinet Office.

The government had left its assessment unchanged in July after downgrading it for five straight months.

Individual assessments on exports, industrial output, business investment, housing and employment were lowered in the latest report.

“Exports and industrial production have fallen substantially, and business investment is falling as well,” the office said. “Housing construction is declining . . . job offers and overtime hours worked are edging down.”

The report took up the global economic slowdown as a matter of concern for the near future, providing data showing that the U.S. slowdown since the latter half of last year has spilled over to Europe and Asia.

Arai said housing construction decreased particularly for owner-occupied houses, as shrinking incomes and worsening employment conditions discourage consumers from building homes.

Inventories seem to have stopped building up for information technology-related devices but are rising for materials such as steel and chemicals, indicating output falls will continue to drag down overall industrial production, he said.

On exports, the senior government economist said shipments to Europe have lost steam particularly in recent months.

Meanwhile, the Cabinet office left unchanged its view on personal consumption, saying, “Private consumption has remained broadly flat, with some weakness seen in recent months.”

Domestic prices were seen as being slightly weak, as with last month.

Arai said, however, that consumption and price movements show signs of growing weaker in the future.

He rejected speculation that the summer heat is boosting consumption by spurring sales of cold beverages, summer clothing, air conditioners and other seasonal items, noting that the summer heat in 1994 failed to buoy overall spending.

Arai noted price falls in raw materials were large enough to offset upward pressures on prices from the weak yen. But he said the extent of decline in consumer prices seems to have stopped widening.

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