Eco Pulse

Japan | Slowdown in growth

11/29/2024

The Japanese economy slowed down in the third quarter, with GDP growth declining to +0.2% q/q (-0.3 pp) – a pace that is expected to continue in the fourth quarter. However, it is worth highlighting the acceleration in private consumption (+0.9% q/q, +0.2 pp). Conversely, investment figures were negative, both for the residential component (-0.1% q/q, -1.5 pp) and the non-residential component (-0.2% q/q, -1.1 pp). The largest negative contribution (-0.4 pp) came from net exports, with growth in imports (+2.1% q/q) significantly exceeding the exports one (+0.4% q/q).

November's activity surveys have showed little change. The Jibun Bank PMI fell marginally in the manufacturing sector and is now in contraction territory for the fifth month in a row (49.0, -0.2 pp). On a positive note, the deterioration in the new export orders sub-component eased (49.2, +3.9 pp). Furthermore, in the services sector, activity edged back into expansion territory (50.2, +0.5 pp). Therefore, the improvement in the composite PMI remained modest (+0.2 pp to +49.8).

Although core inflation (which excludes unprocessed food) fell very slightly, by 0.1 pp to +2.3% y/y in October, prices started to rise again month-on-month (+0.6% m/m), after a fall in September due to the return of subsidised energy bills. Also of note is the acceleration in services prices in year-on-year terms for the first time since June (+1.5% y/y, +0.2 pp).

The situation on the wages front is mixed. On the one hand, in terms of scheduled contractual wages, nominal wage growth accelerated again in September, hitting a 30-year high of +2.5% y/y (+0.1 pp). On the other hand, the measure for full-time employees, which is considered to be more relevant for underlying pressures, remained stable at +2.7% y/y. Real wages fell again to -0.4% y/y. However, the unemployment rate fell to 2.4% (-0.1 pp), which suggests a tight labour market that will help to support wages.

The Bank of Japan (BoJ) meeting on 30-31 October kept the uncollateralized overnight call rate unchanged, at +0.25%. The associated publication of the Q4 Outlook for Economic Activity and Prices reports slightly adjusted forecasts by the members of the Monetary Policy Committee for growth (+1.1% compared with +1.0% in Q3) and core inflation (+1.9% compared with +2.1% previously) for the 2025 fiscal year. This does not alter the BoJ's intention to continue hiking its key rate as per its central scenario.

Article completed on 25 November 2024

THE ECONOMISTS WHO PARTICIPATED IN THIS ARTICLE

Other articles from the same publication

Global
EcoPulse | November 2024

EcoPulse | November 2024

GDP figures for Q3 and recent economic data confirm the existing hierarchy among the major developed economies in terms of growth. [...]

Read the article
Eurozone
 Eurozone | No respite in industry

Eurozone | No respite in industry

The PMI indicator for the manufacturing sector fell further into contraction territory in November, down from 46 to 45.2. In particular, the employment index hit its lowest level since August 2020 (45.3) [...]

Read the article
Germany
Germany | Sluggishness

Germany | Sluggishness

According to the latest business climate and household surveys, the German economy is unlikely to rebound for some time yet. In November, the IFO business climate index (85.7) has returned to a level close to its level in September (85 [...]

Read the article
France
France | Cooling

France | Cooling

The French economy is deteriorating, as evidenced by the business climate and household confidence. The INSEE composite business climate index is down by one point a month, from 98 to 96 between September and November (long-term average at 100) [...]

Read the article
Italy
Italy | Growth at a standstill

Italy | Growth at a standstill

L’activité économique italienne surprend à la baisse en cette fin d’année. Au troisième trimestre, la croissance est restée au point mort (0,0% t/t) [...]

Read the article
Spain
Spain | Strong momentum over the entire year

Spain | Strong momentum over the entire year

The end of the year is shaping up to be as dynamic as it has been all year in Spain. After posting even greater growth than expected in Q3 (0.8% q/q compared to an anticipated level of 0 [...]

Read the article
United States
United States | No need to hurry

United States | No need to hurry

Economic growth in the United States remained strong in Q3, with GDP growth of +0.7% q/q (stable compared to Q2). The acceleration in household consumption (+0.9% q/q, +0 [...]

Read the article
United Kingdom
United Kingdom | Some positive signs, nonetheless

United Kingdom | Some positive signs, nonetheless

The decline in the PMI indices is less pronounced in the United Kingdom than in the eurozone, but it has been well underway since this autumn: the composite PMI fell by 1.8 points to 49 [...]

Read the article