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Economy Watchers Survey down in June, to lowest level since 2001

After having seen a slight recovery in March, the monthly Economy Watchers Survey declined 1.4 points to to 35.5 in April, and then 3.4 points to 32.1 in May. According to the Cabinet Office, that figure fell 2.6 points further to 29.5 in June. This survey measures sentiment among workers who are particularly sensitive to economic trends, including taxi drivers, hotel staff and restaurant workers.

The Economy Watchers survey is measured as an index with a score above 50 indicating a positive view of the economy and a score below 50 representing a pessimistic overall view. It has now clocked in below the 50 mark for 15 consecutive months. June’s 29.5 is the lowest score seen since 27.2 was registered back in October of 2001, and it was the first time the index slipped below 30 since November of that year.

All subindexes of the survey showed a decline, with the services sector showing the strongest downward pressure, by 4.6 points to 30.3. Food and dining related workers reported the lowest score, at 26.8.

Amongst those in sales positions, department store workers, general shop operators and clothing shop employees reported the lowest scores, at 23.4, 23.8 and 24.3, respectively. The score for department stores was the lowest seen in the survey. On the other hand, sentiment at convenience store workers was at 47.3, which was the highest score seen in any category - in fact, it was the only score reported over 40 points. Yes, out of all the front-line sales and service industries surveyed, convenience store workers feel the best about the state of Japan’s economy.

The outlook index for June, which asks workers to predict business conditions for the coming two to three months, declined to 32.1 points.

With corporate profits having fallen 17.5% in the January-March quarter and capital investment down 4.9% during that time, it is starting to look more and more certain that the “economic recovery” is over. Bank lending to large firms is up (1.6% in May), and although the number of bankruptcies was reported to have declined in May, a continued decrease in external demand could truly put the hurt on small and medium size firms in the coming months. June’s corporate goods price index is due out on Thursday, and that will help show a clearer picture as to where costs are going.

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