China slowdown sees first Japanese corporate sales drop in three years
In the July-September quarter, corporate sales fell for the first time in three years, under pressure from China’s economic downturn and falling prices for petroleum products, government data showed Monday.
According to the Ministry of Finance, combined domestic sales slipped 2.6 per cent from a year earlier to 349.50 trillion yen ($3.19 trillion) after a 0.4 per cent increase in the previous quarter.
The worst performers in terms of sales were among suppliers, telecommunications equipment and metal component industries, hit by a downturn in China’s economy based on its trade dispute with the United States, a ministry official said.
Wholesalers led the downturn in the non-manufacturing industry as lower crude oil prices contributed to a decrease in value-related energy-related product revenues.
Retailers ‘ revenues, like home appliance stores, rose over the timeframe due in part to run-in demand before the Oct. 1 consumption tax boost, the official said.
Pretax profits at ministry-based companies fell 5.3 per cent to 17.32 trillion yen in the July-September period following a 12.0 per cent reduction in the previous quarter.
As for spending in property, all non-financial sectors involved in activities including the building of factories and the installation of machinery invested 12.08 trillion yen, up 7.1 per cent for the 12th consecutive quarter of growth.
Given the slow sales and profits, the official of the Finance Ministry said the numbers were in line with the view of the government that the economy was “recovering at a moderate pace,” noting the rise in capital spending.
But some analysts doubted whether such a situation could be sustained in the coming quarters when companies could raising their spending as a consequence of sales and profits dropping.
“I’m not sure that capital investment will remain strong as the non-manufacturing sector may be adversely affected by a possible slump in consumer spending, following the hike in the tax on consumption.” said Yoshiki Shinke, chief economist at the Dai-ichi Life Research Institute.
Seasonally adjusted capital expenditure, including spending on software, fell by 0.8 per cent compared to the previous quarter.
For the July-September cycle on Dec. 9, the Cabinet Office is scheduled to release updated gross domestic product results, taking into account the latest figures for capital spending.
Preliminary GDP data showed that in the third quarter of 2019, the economy grew an annualised average of 0.2 per cent.
The Ministry of Finance surveyed 31,858 companies capitalised at or above 10 million dollars, 23,180 or 72.8 per cent of which replied.