GDP for April – June Period Announced

 

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The GDP for the April-June period was announced on the 12th after the weekend. The real growth rate increased again, by 0.6% for the period or an annualized 2.6%. The increase was driven by a 0.8% rise in personal spending, while capital investment continued its decline with a drop of 0.1%. Led by a GDP deflator that turned positive for the period, economic indicators have shown signs that the deflationary spiral is finally ending, which is a primary focus of the Abe administration. The administration’s high approval rating is largely due to the rising stock prices, boosted by the government’s monetary easing policy and consequent depreciation of the yen, which has led to improved consumer confidence. Meanwhile, the question of how the government will decide on the issue of an increase in the consumption tax rate is worth watching, as is the extent to which that decision will affect the market.

 

Continuing Rise in Gasoline Prices

The escalating price of gasoline presents concerns. The national average retail price of regular gasoline rose for the sixth week, exceeding 160 yen. The highest price in four years and 10 months was reached during the Lantern Festival season, in which many people travel. One reason behind the high oil price is the military coup d’état in Egypt last month, which created political uncertainty. Thus the crude oil price in the Middle East, particularly Dubai, has continued to rise. In Egypt, the temporary government forcibly dispersed an occupation by demonstrators who had gathered in support of the former President Morsi in the middle of the previous week, and as the heartbreaking images suggest, the turmoil will unlikely be resolved for a long time. The high fuel prices dealt a direct blow to the “road trucking sector,” where 173 bankruptcies had been reported as of July 2013. The number of bankruptcies in the sector is expected to reach the high level seen last year. (In fact, 279 road trucking companies went bankrupt in 2011 and 2012.)

 

 

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