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Economy Watchers Index down to second lowest reading ever in September

On Wednesday, the Cabinet Office announced that the Economy Watchers Survey index for September fell 0.3 points from a month before, to 28.0 points. The index has now fallen for six straight months, and was the second-lowest score ever recorded, following the 27.2 reading from October 2001.

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. The survey measures sentiment amongst taxi drivers, restaurant staff, barbers, and other service industry workers sensitive to frontline economic conditions. The index itself has been below the 50 mark for 18 consecutive months.

Once again, the highest score was seen in the sub-index of service industry workers, at 30.2 points. The service industry was the only sector with a score over 30, though this score fell 1.7 points from August. The real estate industry no longer claims the lowest score, having risen 4.1 points to 29.7. The lowest score came from the food industry, which checked in at 23.9 points, plunging 4.9 points from a month before.

Lower oil and gasoline prices, however, have helped bring about a sliver of good news: The outlook sub-index rose for the second month in a row from 32.0 in August to 32.1 in September.

Japan’s consumer confidence hits all-time low for third straight month in August

Last month we noted that it was in the government’s best interest to show the public that it was serious about putting together some form of economic stimulus package if it hoped to restore confidence in Japan’s consumers, whose spending makes up about 55% of GDP. Nothing of the sort happened.

Thus, it comes as no surprise that in August, Japan’s Consumer Confidence Index declined for the fifth month in a row and hit a new all-time low for the third consecutive month.

The Consumer Confidence Index itself contains five scores, each of which is considered positive when above 50, and pessimistic when below the 50 mark. Here’s a breakdown for August figures, with the change from last month:

• Consumer Confidence Index: 30.1 (-1.3)
• Overall Livelihood: 28.5 (-0.8)
• Income Growth: 35.0 (-1.3)
• Employment: 28.4 (-2.3)
• Willingness to buy durable goods: 28.3 (-0.9)

Once again, all five scores have fallen. The “Employment” category has been battered over the last three months, having fallen 6.5 points over that time. For the sake of comparison, let’s take a look at how each score has changed compared to where they were a year ago:

• Consumer Confidence Index: -13.9
• Overall Livelihood: -13.4
• Income Growth: -7.4
• Employment: -18.6
• Willingness to buy durable goods: -17.2

The drops in “Employment” and “Willingness to buy durable goods” are particularly worrisome. Once again, it cannot be said that the government is taking any concrete steps to reassure consumers, although its options are heavily limited. Last month we noted that the government would have put some believable proposal on the table in order to help restore public confidence.

In the interim, Prime Minister Fukuda announced his resignation and the ruling party has been focused almost entirely on itself as it goes through the process of finding a new leader. It seems clear now that Taro Aso will be the next prime minister, and his penchant for deficit spending (ie, public works, pork and favoritism) versus fiscal control is unlikely to win confidence points amongst the public at large. In October we will likely hear that the Consumer Confidence Index dipped below 30 points for the first time ever in September.

Japan April-June GDP revised downward to -3.0% annualized

Just a few minutes ago, the Cabinet Office released its revisions to the April-June GDP data. The preliminary data saw the economy shrinking 0.6% for the quarter, or 2.4% annualized, while the revision shows a 0.7% quarterly drop, or 3.0% annualized.

Where were the revisions? It seems as though private demand and private investment were lower than what the government first thought. Exports also fell from -2.3% to -2.5%.

Economy Watchers Index down again in July

A few days ago, the Nikkei published an article stating that a recovery in the Economy Watchers Survey might help stock prices bounce back. I wrote why I didn’t think any increase in the Economy Watchers Survey would happen in July, although an eventual increase is bound to happen should fuel prices continue to subside.

Yesterday, the Cabinet Office announced that the Economy Watchers Survey index fell 1.0 point from a month before, to 28.3 points. The index has thus been below the 50 point mark for seventeen months in a row and is now at its lowest level since October 2001. 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.

Again, the highest score was seen in the sub-index of service industry workers, at 31.9 points. The service industry was the only sector with a score over 30. Perhaps unsurprisingly, the lowest score came from workers in the real estate industry, at 25.6 - though this score was up 1.2 points from the previous survey.

Nonetheless, we did see a boost in the Nikkei on Monday. The Nikkei 225 climbed 412.23 points on Monday, on news that the US government is set to bail out Freddie Mac and Fannie Mae - so it seems fairly certain that news from the US still overrides domestic sentiment. On Tuesday, however, the Nikkei fell 223.81 points - despite Wall Street’s Monday bounceback.

Japan’s GDP drops an annualized 2.4% in the second quarter

Just three months ago, the Cabinet Office announced that Japan’s first quarter GDP has jumped a surprising 3.3% in annualized terms. No one expected a repeat of such rosy figures in the second quarter, and the 2.4% annualized contraction reported yesterday by the Cabinet Office was about what most observers had expected.

The bad news resounds: Exports fell by 2.3% in the second quarter, declining for the first time in three years. Imports fell 2.8 percent. Consumer spending was down 0.5%, while capital spending slipped 0.2 percent.

Looking through today’s headlines, it’s difficult to find good news: Cell phone sales have dropped through the floor - though this is a cause of an ill-explained change in the way mobile phones are sold in Japan, and should lead to sales increases next year. In the second quarter, sales at DoCoMo fell 21%, AU saw a 19% fall and Softbank’s sales slid 23%. As the Nikkei puts it: Read more

Japan consumer confidence hits all time lows - again - in July

In June we saw Japan’s consumer confidence fall to an all-time low. July’s figures, released yesterday by the Cabinet Office, show that a new all-time low has been reached. The general consumer confidence index figure fell from 32.6 in June to 31.4 in July, for a drop of 1.2 points. Talk of an economic stimulus package from the government has certainly not raised hopes amongst consumers, who continue to deal with higher energy and food prices.

The Consumer Confidence Index itself contains five scores, each of which is considered positive when above 50, and pessimistic when below the 50 mark. Here’s a breakdown for July’s figures, with the change from last month: Read more

Koizumi’s dream of a balanced budget officially dead: Cabinet Office

Just over two years ago, Prime Minister Junichiro Koizumi announced his goal that Japan would have its national budget balanced by 2011. That isn’t going to happen.

Although most observers probably never expected it to happen, the Cabinet Office announced today that rather than having a balanced budget, it expects to see Japan saddled with a budgetary shortfall of 3.9 trillion yen in fiscal 2011. At the same time, this year’s GDP growth forecast was reduced from 2.0% to 1.3% (Last week, the Bank of Japan revised its projections down to 1.2% from 1.5%). Predicted growth in capital spending for this year was revised downward from 3.3% to 0.6%. The rise in consumer prices was revised upward from 0.3% to 1.7%. Consumer spending was revised downward from 1.3% to 1.0% - we need to bear in mind that household spending was down 3.2% in May, down 2.7% in April, down 1.6% in March, flat in February and up 3.6% in January. That looks like a nasty trend.

In January, the Cabinet Office estimated Japan’s national debt at 700 trillion yen. That’s now estimated to be at 778 trillion yen by fiscal 2009.

The real killer from the government’s perspective is that tax revenues are expected to be down, and that this could lead to hikes in consumption and other taxes. While this talk is going on, we also see that the Cabinet Office wants to encourage Japan’s households to dump their 775 trillion yen in deposit assets into the financial markets. Read more

Japan’s Consumer Confidence Index hits all-time low in June

In May, we saw Japan’s consumer confidence fall to its lowest level since December 2001. Late last week, the Cabinet Office released figures for June, and we now see that Japan’s consumer confidence has indeed fallen to its all-time low. According to the numbers, consumer confidence fell 1.3 points to hit 32.6, which is the lowest score seen since the survey was begun in June 1982 (though it was done quarterly instead of monthly until 2004).

The Consumer Confidence Index generates five scores, each of which is considered positive when above 50, and pessimistic when below the 50 mark. Here’s a breakdown for June’s figures, with the change from last month: Read more

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. Read more

Japan’s consumer confidence index plunges to near record-lows in May

Last month, we reported that April’s consumer confidence index had plunged to 5 year lows on the back of worries over increased prices and job uncertainty. On Friday, the Cabinet Office released figures for May, and we have seen yet another dive in the index. According to the Cabinet Office, the consumer confidence index fell from 35.2 in April to 33.9 in May.

May’s score was the lowest seen since December 2001, when the index dipped to 33 points. In its current form, the survey has been carried out since 1982 (though it was done quarterly instead of monthly until 2004). The 33 points registered in December 2001 stands as the all-time low.

The Consumer Confidence Index generates five scores, each of which is considered positive when above 50, and pessimistic when below the 50 mark. Here’s a breakdown for March’s figures, with the change from last month:

• Consumer Confidence Index: 33.9 (-1.3)
• Overall Livelihood: 31.5 (-1.5)
• Income Growth: 37.5 (–0.9)
• Employment: 36.0 (-1.1)
• Willingness to buy durable goods: 33.2 (-1.5)

As in April, all five categories showed a decline. The “Willingness to buy durable goods” remains worryingly low. In fact, May’s score was the second lowest of all-time, after the 31.4 registered in March 1997.

At 31.5, the “Overall Livelihood” score is at its lowest level ever, breaking its record from the previous month. It’s also worth mentioning that no single score has ever dipped below the 30 point mark.

On the same day as these results were released, the Bank of Japan announced that it would not raise interest rates from their current 0.5% level. In his statement, Bank of Japan Governor Masaaki Shirakawa said that compared to April, “More now recognize the downside risk that domestic demand poses for the economy as well as the risk of rising prices.”

On Wednesday, two days before the survey was released, the Nikkei had this to say about consumer spending:

A Cabinet Office survey for May may weigh heavily on domestic demand-based stocks if it shows a further month-on-month deterioration in consumer confidence. The survey will be released on Friday, just when the summer sales season is about to get into full swing and with higher prices for daily necessities such as gasoline and bread making the outlook for consumer spending increasingly uncertain.

Since it hasn’t yet been reported in the major media, we have been following the deterioration of household spending on services and durable goods each month. As the “Willingness to buy durable goods” sub-index continues to fall lower and lower, strong declines in spending on durables and semi-durables have been seen: -6.56% in April, -10.41% in March and -3.65% in February. May’s consumer confidence data leaves little reason to be optimistic about household spending for that month. Overall household spending was down 2.7% in April, with a 0.1% decline in spending on goods and a 2.35% decline in spending on services.

May’s household spending data isn’t due out for a couple of weeks, though department store sales figures will be released later this week.

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