Tuesday, October 1, 2013
Domestic Demand Underpinning Economic Growth In FY13
TOKYO (Nikkei)--Brisk domestic demand is expected to drive the economy through this fiscal year, with a looming consumption tax hike spurring last-minute purchase of homes and automobiles.
The seasonally adjusted industrial production index for August, announced by the Ministry of Economy, Trade and Industry on Monday, fell 0.7% on the month due to a drop-off from a surge seen in July. But a survey of manufacturing forecasts points to a 5.2% increase in output in September and a 2.5% uptick in October.
Production of transport equipment is seen rising for September and October on the back of an uptrend in minivehicle sales. Daihatsu Motor Co. (7262) and Suzuki Motor Corp. (7269) both upgraded their production volumes for minicars this fiscal year by 5-10% from their original plans.
Recently, actual production numbers have often undershot projections. But even if September's manufacturing index, which is forecast to rise 5.2%, ends up climbing only 2%, production for the July-September period will grow 2.1% on the quarter, up from the 1.5% rise in the April-June period.
Consumption growth, buoyed by the economic policies of Prime Minister Shinzo Abe, is beginning to level off. Production of durable goods in August fell 2.5% from July. And the improvement in consumer sentiment is stalling as prices rise and the stock rally runs its course.
However, as the consumption tax hike slated for April approaches, consumption is expected to pick up pace again. Demand for high-ticket items has been strong. Housing starts have increased, and automakers may step up production further.
With the nation's unemployment rate having dropped to the 3%-level, wages may also climb if the labor market continues to tighten, which could prove key to mitigating the chilling effects from the tax hike.
(The Nikkei, Oct. 1 morning edition)