Japan third quarter GDP slows, consumption expected to pick up again

Thu Nov 14, 2013 12:38am EST
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By Tetsushi Kajimoto and Stanley White

TOKYO (Reuters) - Japan's economy slowed less than expected in July-September and is expected to pick up pace in the current quarter as consumers spend now to beat a tax rise next year, but business investment came in sharply below market forecasts.

The 0.5 percent expansion in July-September compares with the median estimate for a 0.4 percent increase and followed 0.9 percent growth in April-June, data showed on Thursday.

It was a fourth successive quarter of growth, the best run for the world's third-largest economy in three years.

A tighter labor market and signs of rising wages should bolster consumer spending in coming quarters, economists said.

Retail sales are likely to pick up before a sales tax rise in April and stimulus spending should help growth, which bodes well for Prime Minister Shinzo Abe's push to foster self-sustaining growth and end 15 years of mild deflation.

However, capital expenditure growth slowed to 0.2 percent in July-September, well below a median estimate of 0.8 percent and suggesting companies remain reluctant to deliver the increased investment needed to secure a sustained recovery.

"Economic growth is expected to accelerate in the final quarter of this year. Despite the soft headline figure today, there's no need to be pessimistic about the outlook," said Junko Nishioka, chief economist at RBS Securities.

"The government's stimulus package is likely to help boost capital expenditure. The ball is in the government's court so I don't think the Bank of Japan will come under pressure for further monetary easing any time soon."   Continued...

A man walks inside a factory at Keihin industrial zone in Kawasaki, south of Tokyo June 28, 2013. REUTERS/Yuya Shino