(Bloomberg) — Japan’s exports gained at the slowest pace in eight months in October as car shipments continued to slump, adding to signs that global supply constraints are still weighing on the economy after it contracted by more than expected last quarter.
The value of Japan’s overseas shipments increased 9.4% from a year earlier, according to the Ministry of Finance on Wednesday. Economists had expected a gain of 10.3%.
While exports of steel and semiconductor manufacturing equipment continued to show sharp gains, exports of cars plunged by more than a third as major automakers scaled back production due to parts shortages.
The figures come just a couple of days before Prime Minister Fumio Kishida is expected to unveil a package of measures to get the economy back on track, including some steps to shore up Japan’s supplies of chips.
“While parts shortages continued to limit car output in October, production was already starting to recover to some extent,” said Masamichi Adachi, economist at UBS Securities. “So slightly stronger exports would have left a better impression.”
Adachi said he expects a pretty strong recovery in car exports overall during the last quarter of the year.
What Bloomberg Economics Says…
“Looking ahead, we expect exports to drop in November, pressured by softer Chinese demand. Chip shortages also remain a downside risk for exports.”
— Asia Economist Team
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The softening export trend places more importance on Kishida coming up with ways to help boost consumer spending in support of the economy rather than relying on external demand. The economy shrank an annualized 3% from July to September, with exports dropping 8.3% from the previous quarter.
The premier is looking to take steps to normalize activity in the economy now that about three quarters of the population is fully vaccinated.
More details:
- Imports gained 26.7% last month due partly to rising oil prices
- Exports to U.S. inched up just 0.4%, as a big drop in car exports dragged on other gains
- The value of shipments to China rose 9.5%, also the smallest gain since February
- Separate data showed machinery orders, a leading indicator of capital spending, were flat in September from a month earlier
While export growth was likely to stabilize in the autumn months as comparison with year-earlier figures became less favorable, the supply-chain snags have cooled the recovery in global trade. The October data showed the volume of exports fell for the first time in eight months from a year earlier.
Still, Toyota Motor Corp. offered hope last week that global supply chains are starting to recover from the recent squeeze. After a series of output cuts, Japan’s biggest automaker said all of its domestic production lines will be operating normally in December for the first time in seven months, according to a statement by the company.
(Adds economist comments)
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