LONDON (Al-Jazeera) - Japan’s economy contracted much faster than expected in the third quarter as global supply disruptions and fresh COVID-19 cases hit business and consumer spending, raising challenges for the new government’s growth plans.
While many analysts expect the world’s third-largest economy to rebound in the current quarter, worsening global production bottlenecks pose increasing risks to the outlook.
“The contraction was far bigger than expected due to supply-chain constraints, which hit output and capital spending hard,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“We expect the economy to stage a rebound this quarter but the pace of recovery will be slow as consumption did not get off to a good start even after COVID-19 curbs were eased late in September.”
The economy shrank an annualised 3 percent in the July-September quarter after a revised 1.5 percent gain in the first quarter, preliminary gross domestic product (GDP) data showed on Monday, compared with a median market forecast for a 0.8 percent contraction.
The weak GDP contrasts with more promising readings from other advanced nations such as the United States, which saw its economy expand 2 percent in the third quarter on strong pent-up demand.
On a quarter-on-quarter basis, GDP fell 0.8 percent compared with market forecasts for a 0.2 percent decline.