Corporate capital spending grew a disappointing 3.5 percent in the October-December quarter from a year earlier, the Finance Ministry said Monday, making it likely that gross domestic product data for the period will be revised downward.
The 3.5 percent rise, below the average market projection of a 10 percent expansion, was the lowest rate of increase since the 1.5 percent gain marked in the July-September quarter of 2003.
The reading, marking the seventh straight quarterly increase, compared with a 14.4 percent expansion in the July-September quarter, according to the ministry’s quarterly survey.
Private-sector economists said the reading is probably push down revised October-December GDP data, which will be released March 14.
“It is inevitable the GDP data will be revised downward,” said Yukari Sato, chief economist at Credit Suisse First Boston Securities (Japan) Ltd. She noted that October-December capital spending was affected by factors that included high oil prices and a rising yen.
“But we maintain our forecast that the economy will hit bottom and resume acceleration by midyear, given that capital spending has been on a gradual uptrend and that falls in consumption in the October-December period were largely due to special factors, such as typhoons and earthquakes,” Sato said, citing stronger than expected data for core machinery orders for the October-December quarter.
The Cabinet Office said in a preliminary report Feb. 16 that GDP shrank a real 0.1 percent in October-December from the previous quarter — or an annualized 0.5 percent — for the third straight quarterly contraction.
The Finance Ministry remained optimistic about the future course of corporate investment activity. A ministry official said the latest spending data will have no negative impact on the overall economy.
“Corporate capital spending in semiconductors and liquid crystal products continued to grow in the reporting year,” the official said.
According to the survey, manufacturers spent 8.4 percent more on plants and equipment during the reporting quarter than they did a year earlier, down from a 14.8 percent rise in the July-September period but marking the seventh straight quarter of increase.
Nonmanufacturers spent 1.3 percent more, down from a 14.2 percent expansion but up for the fifth straight quarter.
Manufacturers of electrical machinery and information and telecom devices led the expansion with a 16.0 percent gain.
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