Japanese Capital Spending Plunges For Tenth Straight Quarter

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Capital expenditure by Japanese companies continued to decline in the third quarter extending the current sequence of decline to ten quarters, the Ministry of Finance reported on Thursday.

Capital spending plunged 24.8% year-on-year in the third quarter, faster than the 21.7% fall in the preceding quarter. Economists had expected a more moderate 16% decline. Excluding software, capital expenditure slumped 25.7% annually in the third quarter, more severe than the 22.2% decrease in the previous quarter.

Capital spending slid by 40.7% in the manufacturing sector and by 12.9% in the non-manufacturing sector. Excluding investment in software, investment in the manufacturing and non-manufacturing sectors dropped 41.4% and 13.7%, respectively.

In the manufacturing sector, investment plummeted 60.6% in fabricated metal products industry. Investment in the petroleum & coal products and chemical & allied products fell 31.6% and 35%, respectively. On the other hand, investment in the food industry climbed 1.6%.

In the non-manufacturing sector, investment in the goods rental & leasing industry slid 55.6% on year. Investment in the services industry dipped 43.5%, while that in the informations & communications sector grew 2%.

At the same time, total sales by Japanese firms slumped 15.7% annually. Sales declined 21.2% in the manufacturing sector and fell 13.1% in the non-manufacturing sector.

Further, the ordinary profits amassed by Japanese companies declined 32.4% year-on-year in the third quarter. Profits were down 69.3% in the manufacturing sector and 7.8% in the non-manufacturing sector.

In other news, Markit Economics reported on Wednesday that the Japan Nomura Services Purchasing Managers' Index stood at a seasonally adjusted 42.3 in November, down from 45 in the previous month. A reading above 50 indicates expansion, while one below 50 suggests contraction. This marks the fastest rate of decline in services activity since June.

Services output declined sharply in November, with respondents blaming further falls in new business. The level of new work placed at Japanese service providers declined at its most marked rate for seven months, reflecting fragile demand.

Employment levels in the services sector fell for the sixteenth straight month and the rate of decline accelerated to its most marked in five months. Panelists cited company closures, falling sales and restructuring efforts as contributory factors for the latest round of job shedding.

Meanwhile, the Nomura Composite Output Index, which is a weighted average of the Manufacturing Output Index and the Services Business Activity Index, stood at 45.4 in November - the third straight month in which the index has remained below the neutral level of 50.

The Japanese yen remained weak following the release of the Ministry's capital expenditure report.

Capital expenditure by Japanese companies continued to decline in the third quarter extending the current sequence of decline to ten quarters, the Ministry of Finance reported on Thursday. (Market News Provided by RTTNews)