Capital spending in the January-March period fell for the 12th straight quarter, although the pace of decline narrowed, as companies remained cautious amid lingering uncertainty over the future outlook, the government said Thursday.
Capital expenditure for all industries excluding the financial and insurance sectors dropped 11.5 percent to ¥11.14 trillion, slower than the 17.3 percent drop in the previous period, according to a report by the Finance Ministry.
The government believes companies are “still in a severe climate,” although a pickup in sales and profits indicates the overall sentiment has continued to recover from the long-standing recession, a ministry official said.
“The capital spending is heading toward bottoming out, but the pace of improvement is unlikely to be so smooth, as the levels of equipment operating ratio and profitability are still sluggish,” said Atsushi Matsumoto, an economist at Mizuho Research Institute.
Spending on plants and equipment among manufacturers suffered a 31.2 percent drop, falling for seven quarters in a row, as bleak demand and a sense of uncertainty about the future outlook kept firms cautious, the ministry said.
Nonmanufacturers’ spending increased for the first time in 12 quarters, up 0.4 percent.
Sales expanded 10.6 percent to ¥344.13 trillion, the first growth in nine quarters, as firms making such items as automobiles and semiconductors enjoyed an increase on the back of stimulus steps implemented at home and abroad.
Pretax profits grew 163.8 percent to ¥11.26 trillion, the largest jump since the April-June quarter of 1955.
But the growth in sales and profits largely reflected the huge declines in the previous year, and the values remained markedly low compared with the same period in 2008, Matsumoto said.
The ministry polled 28,809 companies capitalized at ¥10 million or more, of which 74.5 percent responded.
Think tanks are closely watching the capital expenditure data as the government uses them in calculating revised gross domestic product figures for the same quarter, due out next week.
In its May 20 preliminary report, the government said the economy expanded for the three months at an annualized pace of 4.9 percent, marking the fourth consecutive quarter of growth.
In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.