Corporate capital spending rose 3.8 percent in the three months through December from a year earlier, recovering for the second consecutive quarter and reflecting improved earnings and sentiment, the Finance Ministry said Thursday.
But the result, coupled with weaker inventory investment, led to a mixed view on how the government will revise the economic growth data for the quarter in a report due out March 10, while there are concerns that the recent sharp rises in crude oil prices could derail the economic recovery by dampening business confidence.
The value of investment in plant and equipment by all industries excluding the financial and insurance sectors stood at ¥9.24 trillion. The rate of rise was slower than 5.0 percent in the previous quarter, which was the first hike in more than three years.
Quarter on quarter, capital spending excluding investment in software grew a seasonally adjusted 0.7 percent from the July-September period for the third consecutive quarterly growth.
Investment by manufacturers rose 13.0 percent year on year to ¥3.20 trillion for the second-straight quarter of improvement, mainly led by information equipment makers, which benefited from strong sales of smart phones, as well as by steel and electric machinery makers.
Spending by nonmanufacturers slid 0.5 percent to ¥6.04 trillion, down for the first time in four quarters, reflecting weakness among utility providers, wholesalers and the transport service industry, the ministry said.
The robustness of manufacturers came as a sign of recovering exports. The strength of the yen has adversely affected the earnings of exporters, but the ministry underlined that major exporters have taken measures against the impact of a stronger currency.
The quarterly survey also showed pretax profits on an all-industry basis grew 27.3 percent to ¥13.21 trillion, rising for the fifth straight quarter, while combined sales gained 4.1 percent to ¥348.94 trillion, up for the fourth consecutive quarter.
Corporate earnings “kept recovering,” a ministry official told a press briefing.
But given civil unrest spreading across the Middle East and North Africa, as well as subsequently rising prices of oil and other commodities, the ministry expressed concern, saying the government is closely watching whether the higher raw material costs could cause downward pressure on earnings.
The economy contracted in the final quarter of 2010, with gross domestic product falling a real 0.3 percent, or an annualized 1.1 percent, from the previous quarter on weak private consumption amid the diminishing effects of fiscal stimulus measures.
Revision of GDP is now largely affected by the capital spending figures the ministry releases.
“It is confirmed that capital spending has continued its moderate recovery in the quarter,” said Naoki Tsuchiyama, an economist at Mizuho Securities Co.
The business investment component, which accounts for some 14 percent of Japanese GDP, rose a price-adjusted 0.9 percent in a preliminary report released Feb. 14. Tsuchiyama said the number could be revised upward to 1.2 percent, and the GDP growth could be accordingly upgraded to minus 0.2 percent, or an annual rate of minus 0.9 percent.
There are some other views, though, that expect the government to downgrade the preliminary figures.
Economists at Nomura Securities Co. forecast real GDP growth will be revised downward to between an annualized minus 1.5 and minus 1.9 percent.
The ministry surveyed 30,585 companies capitalized at ¥10 million or more, of which 73.7 percent provided valid responses.
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