Japanese Data Roundup

June 29, 2012

A considerable number of Japanese economic statistics are released near the end of every month, including consumer prices, industrial production, retail sales, unemployment, real household spending, housing starts, construction orders, auto production, and the purchasing managers survey of manufacturers.  June’s report of May-June data was a mixed bag that on balance doesn’t alter the view that the economy will outgrow many other industrial economies in 2012.  The range of projected GDP increases in 2012 has a center that’s a shade above 2.0%.

Retail sales rose 0.7% between April and May.  The two months together saw sales advance 4.6% from a year earlier.  Similarly, real household spending climbed 1.5% on month and by 4.0% between May 2011 and May 2012 despite a 0.4% contraction of real disposable income.   The labor market continues to improve gradually, with unemployment falling in May to 4.4%, the lowest level since October and the job offers-to-seekers ratio continuing to edge upward.  At 0.81, such is 0.20 points higher than in May 2011 and almost twice as great as the Great Recession low of 0.42. 

A deterrent to consumer spending continues to be the persistence of deflation.  In Tokyo, where price data are released on a more timely basis than nationwide statistics, the consumer price index fell 2.8% at a seasonally adjusted annualized basis between March and June versus a rise of 0.4% over the first quarter of this year.  National consumer prices on a seasonally adjusted basis slid by 0.2% in March and May and by 0.3% in April.  Excluding fresh food and energy, the CPI recorded a 0.6% drop in the twelve months to May, but Tokyo data suggest that decline may swell in the short term.

Officials upgraded their assessment of industrial production based on promising survey evidence of upcoming months rather than the May results, which were worse than expected.  The assessed “flat” trend during the final third of 2011 had been upgraded to “shows signs of upward movement” at start of this year and to “continues to show upward movement” in the reports released in February, March and April.  That view was bumped up once again this month to “continues to show improvement,” as officials are predicting that output will climb in June by 2.7% and then another 2.4% in July.  May showed a disappointing 3.1% drop, however, leaving April-May 1.5% lower than the first-quarter average level.  Even if industrial production does climb 2.7% in June, the second quarter-over-first quarter change will be negative for the first quarter since 2Q11.  Further suggesting that officials might have been premature with their assessment change, the manufacturing PMI index printed at 49.9, the first sub-50 reading since November.  In this as in all PMI indices, readings below 50.0 signify contraction, and both orders and production contributed to the 0.8 point drop of Japan’s index from scores of 51.1 in March and 50.7 in both April and May.

Japanese officials can be excused for their optimism.  Real GDP advanced 4.7% at an annualized rate in the first quarter of 2012, a great start for the year.  But caution should be exercised in interpreting Japan’s volatile GDP figures.  There had been five prior quarters when GDP grew 4.0% or better since the end of the Great Recession, yet growth in calendar 2011 was negative 0.7%.  Annualized growth over the fifteen years between 4Q96 and 4Q11 averaged a mere 0.5%.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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