Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The Covid-19 pandemic and supply chain disruption is continuing to hamper the global economic recovery, with Japan and Thailand’s economies both contracting in the last quarter.
Japan’s economy shrank by 0.8% in the third quarter of this year, new figures show, a deeper fall than expected as global supply disruptions hit exports and business spending plans.
The rise in Covid-19 cases this summer, which led to emergency soft lockdown measures in Tokyo and other regions, also hurt the recovery. Private consumption fell 1.1% during the quarter.
Capital expenditure by companies slumped by 3.8%, with some manufacturers such as carmakers struggling to obtain raw materials and parts.
The contraction suggests that the world’s third-largest economy is being hit harder than expected by production bottlenecks, which continue to grip the global economy.
Economists had only expected Japan’s GDP to fall by 0.2% during the quarter.
As Takeshi Minami, chief economist at Norinchukin Research Institute, put it
“The contraction was far bigger than expected due to supply-chain constraints, which hit car output and capital spending hard.”
Economists predict that Japan’s economy will return to growth this quarter. But the sharp fall in Q3 GDP could also spur prime minister Fumio Kishida to unveil a significant stimulus package soon.
Alvin Tan of RBC Capital Markets says:
Japan’s Q3 GDP was weaker-than-expected at -3% q/q annualised, which should provide added impetus for the proposed fiscal stimulus package. A package of over ¥40 trillion is reportedly being considered.
Danske Bank Research
(@Danske_Research)🇯🇵🤕 If anybody was in doubt how hard hit the Japanese economy has been by #COVID19 look no further than this morning’s GDP figures and this chart.
Japan is one of the countries with the biggest activity gap to both pre corona-levels and pre crisis trend. pic.twitter.com/RdnqY1pbBT
Christophe Barraud🛢
(@C_Barraud)🇯🇵 #Japan’s Shrinking Economy Fuels Expectation for Kishida Stimulus – Bloomberg
*GDP slips 3% for fifth contraction in last eight quarters.
*Link: https://t.co/c6OPzcuXjg pic.twitter.com/I8psAT7b5N
Thailand’s economy has also been hit by Covid-19 curbs this summer, which hit its tourism sector.
Thailand’s GDP shrank by 1.1% during the third quarter of the year – which is actually rather better than the 2.5% contraction which economists were bracing for. It left the economy 0.3% smaller than a year ago.
Exports in the third quarter grew 15.7% from a year earlier, but private consumption fall by 3.2%, hit by pandemic restrictions.
Trinh
(@Trinhnomics)Thailand GDP came out and it crushed expectations by DECLINING less than expected by -0.3%YoY.
So far, here are the Q3 figures in Asia (%YoY) & I’ll give u a quick quiz too:
Philippines 7.1
China 4.9
Indonesia 3.5
Japan 1.4
Thailand -0.3
Malaysia -4.5
Vietnam -6.2Who’s WORST? pic.twitter.com/ayPb6Yatpe
Again, there are hopes of a recovery in Q4, as Covid-19 cases fall, restrictions are being lifted and the vaccine rollout speeds up.
Danucha Pichayanan, the head of Thailand’s National Economic and Social Development Council, told a news conference that economic indicators pointed to improving conditions – and that domestic consumption, public spending and tourism will drive growth in 2022.
“If there are no more outbreaks, the fourth quarter will definitely be better than the third.
Also coming up today
The Bank of England governor, Andrew Bailey, is testifying to MPs on the Treasury Committee this afternoon, along with chief economist Huw Pill,and external MPC members Michael Saunders and Dr Catherine Mann.
They’ll discuss the Bank’s decision to leave interest rates on hold this month, and its forecast for inflation to hit 5% next year, and are likely to also cover the UK’s labour market, price and wage rises, and the outlook for the economy.
We’ll also hear from European Central Bank chief Christine Lagarde, when she appears before MEPs on the economic and monetary affairs committee this morning
European markets are expected to open slightly lower, with anxiety over inflation weighing on stocks after US consumer confidence hit a 10-year low on Friday.
IGSquawk
(@IGSquawk)European Opening Calls:#FTSE 7338 -0.13%#DAX 16090 -0.02%#CAC 7084 -0.11%#AEX 820 -0.02%#MIB 27717 -0.05%#IBEX 9062 -0.21%#OMX 2359 -0.28%#SMI 12487 -0.24%#STOXX 4369 -0.04%#IGOpeningCall
The agenda
- 10am GMT: Eurozone trade balance for September
- 10am GMT: ECB president Christine Lagarde testifies to the European Parliament’s Committee on Economic and Monetary Affairs.
- 2.30pm GMT: Bank of England policymakers testify to the Treasury Committee