TOKYO (Reuters) – Japan’s economy shrank slightly faster than initially reported in the third quarter, as a sharp rise in local COVID-19 cases delivered a heavy blow to private consumption and a global chip supply shortage took a toll on corporate sentiment.
The deeper contraction is a setback for policymakers hoping easing supply shortages and loosened pandemic curbs would support a recovery in the world’s third-largest economy this quarter.
Japan’s economy declined an annualised 3.6% in July-September, worse than the preliminary reading of an annualised 3.0% contraction, Cabinet Office data showed Wednesday.
The reading, which was also worse than economists’ median forecast for a 3.1% drop, equals a real quarter-on-quarter contraction of 0.9% from the prior quarter, versus a preliminary 0.8% drop.
The faster decline was mainly due to a larger fall in private consumption, which makes up more than half of gross domestic product and shrank 1.3% from the previous three months, worse than the initial estimate of a 1.1% drop.
The data showed public investment dropped 2.0% versus the initial estimate of a 1.5% decline, while capital spending saw a smaller fall, shrinking 2.3% from the prior quarter, compared to 3.8% preliminary drop.
The net contribution of exports to the GDP change was zero, offset by imports, while domestic demand pulled it down by 0.9 percentage point, matching a preliminary contribution.
The GDP downgrade comes after data on Tuesday showed household spending fell for a third straight month in October, a sign it may take time for consumer spending to recover.
Since the start of the pandemic, Japan’s government has sought to support the fragile economy by large-scale fiscal spending. It unveiled a record $490 billion package last month.
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