ROUNDUP - Japan Q1 survey results show corporate sector resilient
TOKYO (XFN-ASIA) - The results of the latest government survey of the corporate sector show capital investment was resilient in the first quarter, despite slower growth in profits and the risk that demand in the US will moderate, analysts said.
They said the results could mean that the revised figures for GDP for the first quarter will turn out to be higher than the preliminary estimates.
But analysts warned that corporate activity could slow because of inventory adjustments in the information technology sector and moderation in economic growth in the US.
The Ministry of Finance surveyed 24,148 companies with capital exceeding 10 mln yen and received replies from 19,077.
The survey found that combined corporate capital spending by non-financial firms was 13.6 pct higher in the first quarter than a year before, rising for the 16th straight quarter.
The government uses the results of the quarterly corporate survey to fine-tune the non-residential investment and private-sector inventory data used in calculating GDP. Non-residential investment is virtually equivalent to corporate capital spending.
In its preliminary estimate, released last month, the government said the economy had grown by 0.6 pct in real terms in the first quarter, or at an annual rate of 2.4 pct.
The preliminary estimate was that the non-residential investment was 0.9 pct lower in the first quarter than in the fourth quarter of last year, and that this subtracted 0.1 percentage point from overall GDP.
The government will release the revised real GDP data for first quarter on next Monday.
Tatsushi Shikano, senior economist at Mitsubishi UFJ Securities, said he expected the latest capital investment figures to mean that the revised GDP data for the first quarter would show annual growth of 3.0 pct.
The survey found that combined capital investment by manufacturers was 12.7 pct higher in the first quarter than a year before, having been 15.4 pct higher in the fourth quarter of last year than a year earlier.
In the non-manufacturing sector, the aggregate capital investment was 14.1 pct higher in the first quarter than a year before, having been 17.5 pct higher in the fourth quarter of last year than a year earlier.
"Given the relatively solid investment figures, non-residential investment may be revised to show no change in the January-March period from the previous quarter, rather than a sequential fall of 0.9 pct," Shikano said.
Taro Saito, senior economist at NLI Research Institute also said he expected the latest capital investment data to mean that the revised GDP figures for the first quarter would show annual growth of 3.0 pct.
"Given the slowdown in the growth pace in the US, we could say that Japan did well," Saito said.
But Junichi Makino, a senior economist at Daiwa Institute of Research, said he expected the latest capital investment data to mean that the revised GDP figures for the first quarter would show annual growth of only 2.5 pct, because the likely upward revision of the non-residential investment component would be canceled out by the effects of downward revisions of the private inventory and public sector outlays components.
Economists remarked on the further moderation of the growth of corporate profits.
The combined parent current profits of non-financial firms was just 7.4 pct higher in the first quarter than a year before, after increases of 8.3 pct in the fourth quarter of last year and 15.5 pct in the third.
Combined current profits were 0.5 pct lower in the first quarter than in the fourth, led by a drop of 5.5 pct drop in manufacturers' current profits.
"Given the sequential decline in corporate profits, which are a key leading indicator of capital investment, capital outlays may see a further and more outright slowdown in growth later this year, led by manufacturers," Makino said.
"And once manufacturers start seeing their profitability eroded, they tend to curtail sales, administration and general expenditure, which may thwart the investment plans of non-manufacturers," he said.
(1 usd = 121.93 yen)
They said the results could mean that the revised figures for GDP for the first quarter will turn out to be higher than the preliminary estimates.
But analysts warned that corporate activity could slow because of inventory adjustments in the information technology sector and moderation in economic growth in the US.
The Ministry of Finance surveyed 24,148 companies with capital exceeding 10 mln yen and received replies from 19,077.
The survey found that combined corporate capital spending by non-financial firms was 13.6 pct higher in the first quarter than a year before, rising for the 16th straight quarter.
The government uses the results of the quarterly corporate survey to fine-tune the non-residential investment and private-sector inventory data used in calculating GDP. Non-residential investment is virtually equivalent to corporate capital spending.
In its preliminary estimate, released last month, the government said the economy had grown by 0.6 pct in real terms in the first quarter, or at an annual rate of 2.4 pct.
The preliminary estimate was that the non-residential investment was 0.9 pct lower in the first quarter than in the fourth quarter of last year, and that this subtracted 0.1 percentage point from overall GDP.
The government will release the revised real GDP data for first quarter on next Monday.
Tatsushi Shikano, senior economist at Mitsubishi UFJ Securities, said he expected the latest capital investment figures to mean that the revised GDP data for the first quarter would show annual growth of 3.0 pct.
The survey found that combined capital investment by manufacturers was 12.7 pct higher in the first quarter than a year before, having been 15.4 pct higher in the fourth quarter of last year than a year earlier.
In the non-manufacturing sector, the aggregate capital investment was 14.1 pct higher in the first quarter than a year before, having been 17.5 pct higher in the fourth quarter of last year than a year earlier.
"Given the relatively solid investment figures, non-residential investment may be revised to show no change in the January-March period from the previous quarter, rather than a sequential fall of 0.9 pct," Shikano said.
Taro Saito, senior economist at NLI Research Institute also said he expected the latest capital investment data to mean that the revised GDP figures for the first quarter would show annual growth of 3.0 pct.
"Given the slowdown in the growth pace in the US, we could say that Japan did well," Saito said.
But Junichi Makino, a senior economist at Daiwa Institute of Research, said he expected the latest capital investment data to mean that the revised GDP figures for the first quarter would show annual growth of only 2.5 pct, because the likely upward revision of the non-residential investment component would be canceled out by the effects of downward revisions of the private inventory and public sector outlays components.
Economists remarked on the further moderation of the growth of corporate profits.
The combined parent current profits of non-financial firms was just 7.4 pct higher in the first quarter than a year before, after increases of 8.3 pct in the fourth quarter of last year and 15.5 pct in the third.
Combined current profits were 0.5 pct lower in the first quarter than in the fourth, led by a drop of 5.5 pct drop in manufacturers' current profits.
"Given the sequential decline in corporate profits, which are a key leading indicator of capital investment, capital outlays may see a further and more outright slowdown in growth later this year, led by manufacturers," Makino said.
"And once manufacturers start seeing their profitability eroded, they tend to curtail sales, administration and general expenditure, which may thwart the investment plans of non-manufacturers," he said.
(1 usd = 121.93 yen)
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