Japan’s economy shrinks 5.1% as pandemic dries up spending
TOKYO (AP) — The Japanese economy contracted at an annual rate of 5.1% in January-March, slammed by a plunge in spending over the coronavirus pandemic, according to government data released Tuesday.
The Cabinet Office’s preliminary seasonally adjusted GDP, or gross domestic product, showed household consumption dropped at an annualized rate of 5.6%, while government spending declined 6.9%.
Gross domestic product is the sum value of a nation’s products and services. The annualized rate shows what the rise or drop would have been if that same pace had continued for a year.
Much of Japan has been under a state of emergency, centered around early closures of restaurants and bars, to curb the spread of the virus at places where crowds gather.
Still, COVID-19 illnesses and deaths have been rising amid one of the slowest vaccine rollouts in the developed world. About 4% of the population has gotten at least one shot so far.
Analysts say a more thorough vaccination effort is the only realistic way economic activity can resume close to normal and growth can recover to pre-pandemic levels. Japan’s GDP drop over the last fiscal year is the worst since the end of World War II, surpassing the global financial crisis.
The world’s third-largest economy managed to eke out growth in the last two quarters, slowly recovering from earlier pandemic damage. It grew 2.8% in October-December, compared to the previous quarter, and expanded 5.3% July-September on-quarter. It had shrunk the quarter before that, at a minus 8.1% in April-June. These are all not annual rates but compared to the previous quarter.
For the latest quarter, the contraction on quarter stood at minus 1.3%.
For the 2020 calendar year, Japan’s economy sank 4.7%, the first year of contraction in 11 years, the Cabinet Office said. Economic growth was flat in 2019.
Robert Carnell, Regional Head of Research Asia-Pacific at ING, said the latest results were slightly worse than what analysts had expected, highlighting the negative effects of restrictions on movement during the emergency.
“The prospects for growth in the rest of the year are looking much weaker,” he said.
“With Japan still lagging behind even many developing Asian economies when it comes to vaccination rates, we believe a more rapid second-half improvement is unlikely.”
Although trade has been recovering as overseas nations get vaccinated, much of the Japanese economy depends on domestic demand.
Japan never had a lockdown for COVID-19, trying to keep business activity going while encouraging working from home and social distancing. Japan has had more than 11,500 deaths from COVID-19.
Cases are surging especially in urban areas, such as Osaka and Tokyo, and hospital beds are running out in some spots. The public has grown increasingly opposed to holding the Tokyo Olympics, postponed from last year and set to begin in July, Japanese media surveys and an online protest petition show.
India's GDP shrank by 7.3% in 2020-21; up by 1.6% in last quarter
The fourth quarter of 2020-21 recorded a growth of 1.6% in GDP, the second quarter of positive growth, after the country had entered a technical recession in the first half of the year.
India's Gross Domestic Product (GDP) contracted 7.3% in 2020-21, as per provisional National Income estimates released by the National Statistical Office on Monday, marginally better than the 8% contraction in the economy projected earlier. GDP growth in 2019-20, prior to the COVID-19 pandemic, was 4%.
The fourth quarter of 2020-21 recorded a growth of 1.6% in GDP, the second quarter of positive growth, after the country had entered a technical recession in the first half of the year. The Gross Value Added recorded 3.7% growth in Q4, compared to 1% in Q3. GVA had contracted 22.4% and 7.3% in the first and second quarters of 2020-21.
The GVA in India's economy shrank 6.2% in 2020-21, compared to a 4.1% rise in the previous year. Only two sectors bucked the trend of negative GVA growth - Agriculture, Forestry and Fishing (which rose 3.6%) and Electricity, Gas, Water Supply and other Utility Services (up 1.9%).
GVA from Trade, Hotels, Transport, Communication and Broadcasting-related services recorded the sharpest decline of 18.2%, followed by Construction (-8.6%), Mining and quarrying (-8.5%) and Manufacturing (-7.2%).
GDP had contracted 24.4% in the April to June 2020 quarter, followed by a 7.4% shrinkage in the second quarter. It had returned to positive territory in the September to December quarter with a marginal 0.5% growth.
The National Statistical Office attributed the improvement over its earlier growth estimates, to the improved performance of indicators, used in compilation of GVA, in the fourth quarter of 2020-21, owing to calibrated and steady opening of the economy.
"In addition to this, revised data received from some source agencies for the previous quarters and receipt of GST data for third quarter along with fourth quarter have also contributed to the revision in the estimates," the NSO said.
The NSO also warned that data collection had been impacted as much as any other activity by the pandemic, so its estimates could undergo sharp revisions.
Early results on the performance of Corporate Sector for April-December 2020, which
were used in the second Advance Estimates (that projected an 8% contraction in GDP), have been revised using the latest available information, it said.
“Considering the current Covid situation, the statutory timelines for filing the requisite financial returns of fourth quarter have been extended by the Government. Consequently, the private corporate sector estimates of industries are based on other indicators like IIP, GST, etc. This may have implications on subsequent revision of these estimates,” it said
Australia’s economy booms to pre-pandemic levels as consumers, businesses spend
People cross a busy street under holiday decorations in the city centre of Sydney, Australia, December 17, 2020. REUTERS/Loren Elliott
Australia’s economy raced ahead last quarter as consumers and businesses spent with abandon, lifting output back above where it was last year when pandemic lockdowns tipped the country into its first recession in three decades.
The economy expanded by a real 1.8% in the three months to March, data from the Australian Bureau of Statistics (ABS) showed on Wednesday. Economists in a Reuters poll had forecast a 1.5% rise following an upwardly revised 3.2% gain in the fourth quarter.
The solid back-to-back quarterly growth helped annual output climb 1.1% to A$525.7 billion ($408.05 billion), a major turnaround from last year's recession low of $468.3 billion.
The better-than-forecast figures pushed Australia's benchmark share index (.AXJO) to record highs while supporting the local dollar near a one-week top.
Australia is in rare company here with only five other countries boasting an economy that’s larger than before the pandemic, said Kristian Kolding, a partner at Deloitte Access Economics.
On average, Australia's rich world peers are 2.7% smaller than they were before the pandemic, Deloitte's research found, with the United Kingdom shrinking almost 9%, the European Union contracting by 5% and the United States 1% smaller.
Australia announced strict social distancing rules in late-March 2020 to curb the coronavirus pandemic, forcing businesses from retailers to cafes and restaurants to down shutters while leading hundreds of thousands to queue up for welfare payments.
But the A$2 trillion economy has since staged a remarkable comeback by keeping virus numbers in check which has allowed businesses to reopen with confidence. Hefty and timely monetary and fiscal stimulus have been beneficial too.
"Today’s numbers show Australia’s recovery is becoming more broad-based," Deloitte's Kolding said.
"Families are spending locally, and businesses continue to invest, making the most of record low interest rates and tax offsets," Kolding added.
Wednesday's data showed the first-quarter expansion was driven by private investment which contributed 0.9 percentage points to growth with machinery and equipment investment clocking its strongest quarterly rise since December 2009.
A surge in dwelling activity also helped while household spending added 0.7 percentage points to growth.
"Underpinning all of that is continued strength in jobs numbers," Kolding added.
OUTLOOK CAUTIOUS
Australia's employment is higher than before the pandemic while measures of underemployment and unemployment have slipped rapidly though they are still above levels the country's central bank believes is needed to spark wage pressures.
The Reserve Bank of Australia (RBA) has welcomed recent strength in data but has reiterated it will not raise the cash rate from its record low of 0.1% until inflation was sustainably within its 2-3% target band.
For that to occur, the RBA says the jobless rate will need to fall to or below 4% from 5.5% currently and wage growth will have to double to at least 3%, conditions the central bank believes are unlikely to be met before 2024 at the earliest.
Analysts were circumspect about the outlook given slow COVID-19 vaccine rollout across the nation and an extension of a seven-day lockdown in Australia’s second-most populous city Melbourne by another week to stop a rapidly-spreading coronavirus strain.
"This lockdown will be the first lengthy one without JobKeeper so we need to be a bit more cautious about how the recovery may look," ANZ economists wrote in a note, referring to a government welfare payment.
Australian Treasurer Josh Frydenberg on Wednesday hinted at some fiscal support for Victoria, which has been under lockdown since last week. A lockdown in the capital city Melbourne has been extended, while some restrictions will persist elsewhere in the southern eastern state.
KPMG economists say the lockdown is costing the Victorian economy A$125 million a day.
