With the deterioration in employment and income conditions slowing
and consumer confidence improving, consumer spending continued
to rise thanks to (i) the continued firm sales performance of
digital consumer electronics and (ii) a gentle recovery of spending
on services, among other factors. Sales of winter clothing were
sluggish owing to the mild weather from November through the
first half of December, but the negative impact on consumer
spending was outweighed by the boost provided by consumption
of other products and services.
Investment in the construction of condominiums in the Tokyo
area remained firm, but the reaction to the demand rush ahead
of the deadline for preferential tax treatment of housing loans
and the raising of interest rates caused a sharp fall in construction
starts on detached houses across the country, and overall housing
investment figures has fallen for the first time in two quarters.
Capital investment has risen sharply, and the figures are likely
to be up 6.7% on the previous quarter (equivalent to an annualized
rate of +29.4%). Although some of this growth may have been
a reaction to the sudden deceleration observed in the July-September
quarter, most was generated by a substantial rise in capital
investment in the manufacturing sector, centering on electrical
machinery and general machinery. On the supply side, investment
in special industrial equipment such as industrial robots and
metalworking machinery saw substantial growth, and investment
in computers also held firm.
Although civil servant salaries remained weak, government consumption
continued to grow owing to the expansion of spending on medical
care and nursing. Public investment remained fairly constant,
but this is thought to have been a reaction to the substantial
fall over the past two quarters, and the downward trend is likely
to continue in the medium-to-long term.
With the recovery of the global economy gathering momentum,
the growth of exports is accelerating. Among exports to Asia
in particular, there has been substantial growth of exports
to satisfy internal demand such as chemical products and general
machinery as well as exports of production goods such as electronic
devices and audio equipment components.
Although imports continue to grow on the strength of the recovery
of manufacturing output, the growth has been slow in comparison
to that of exports. As a result, the contribution of external
demand is likely to be +0.4% on the previous quarter (equivalent
to an annualized rate of +1.7%).