Corporate sales fell for the first time in three years in the July-September quarter, pressured by China’s economic downturn and dips in petroleum product prices, government data showed Monday.
Combined sales of domestic companies dropped 2.6 percent from a year earlier to ¥349.50 trillion ($3.19 trillion), following a 0.4 percent rise in the previous quarter, according to the Finance Ministry.
Among manufacturers, telecommunications equipment and metal product sectors were the worst performers in terms of sales, affected by a slowdown in China’s economy on the back of its trade dispute with the United States, a ministry official said.
In the nonmanufacturing sector, wholesalers led the decline as lower crude oil prices led to a fall in oil-related product sales in value terms.
Sales of retailers, including home appliance shops, grew during the period due partly to run-in demand before the consumption tax increase on Oct. 1, the official said.
Pretax profits at companies covered by the ministry’s survey declined 5.3 percent to ¥17.32 trillion in the July-September period after a 12.0 percent plunge the previous quarter.
As for capital investment, all nonfinancial sectors involved in activities that require the building of factories and adding of equipment spent ¥12.08 trillion, up 7.1 percent for the 12th consecutive quarter of increase.
Despite the sluggish sales and profits, the Finance Ministry official said the figures were in line with the government’s view that the economy has been “recovering at a moderate pace,” citing the increase in capital spending.
But some economists questioned whether such a scenario could be maintained in the coming quarters as companies could cut their investment as a result of falls in sales and profits.
“I’m not sure capital investment will remain strong as the nonmanufacturing sector could be negatively affected by a possible slump in consumer spending following the consumption tax hike,” said Yoshiki Shinke, chief economist at the Dai-ichi Life Research Institute.
Compared with the previous quarter, seasonally adjusted capital expenditure including spending on software fell 0.8 percent.
The Cabinet Office is scheduled to release revised gross domestic product data for the July-September period on Dec. 9, taking into account the latest capital spending figures.
Preliminary GDP data showed that the economy grew an annualized real 0.2 percent in the third quarter of 2019.
The Finance Ministry surveyed 31,858 companies capitalized at ¥10 million or more, of which 23,180, or 72.8 percent, responded.