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Japan's economy faces downside risks in the fourth quarter from prolonged supply chain disruptions and private consumption is not expected to rebound in line with more upbeat sentiment on pandemic recovery, a senior official at the Cabinet Office said Monday.
"Consumer sentiment recovered to a high level and it showed consumers' positive stance. But the recovery of sentiment was mainly based on strong (rebound) expectations," the official told reporters.
"How private consumption evolves in the fourth quarter is a vital issue (for us) to predict the future economy," the official said.
Japan's economy posted the first contraction in two quarters for the July-September period, weighed down by weak private consumption and capital investment, preliminary GDP data released by the Cabinet Office Monday showed.
The Q3 GDP fell 0.8% q/q, or an annualized -3.0% following a revised +0.4% q/q, or an annualized revised +1.5% for the second quarter.
The Q3 contraction was weaker the MNI median forecast that pointed to a drop of 0.3% q/q, or an annualized -1.0%.
Private consumption, which accounts for about 60% of Japan's GDP, fell 1.1% q/q in Q3, after an unrevised 0.9% rise in Q2. The median forecast was for a
0.9% q/q fall.
Business investment fell 3.8% q/q in Q3, the first drop in two quarters following revised +2.2% in Q2. The median forecast was for a 0.5% fall.
The average economist forecast for Q4 GDP growth is annualized at +4.93%, according to the latest monthly ESP Survey of 37 economists by the Japan Center
for Economic Research conducted from October 28 to November 5.