Japan’s Q1 GDP Plunges More Than Estimated 3.7%

From Bloomberg:

Japan’s economy shrank more than estimated in the first quarter after the March 11 earthquake and tsunami disrupted production and prompted consumers to cut back spending, sending the nation to its third recession in a decade.

Gross domestic product contracted an annualized 3.7 percent in the three months through March, following a revised 3 percent drop in the previous quarter, the Cabinet Office said today in Tokyo. The median forecast of 23 economists surveyed by Bloomberg News was for a 1.9 percent drop.

The March disaster hit an economy already weighed down by years of deflation and subdued consumer spending, and slashed profits at companies including Toyota Motor Corp. as factories were shut. The economy, now the smallest size since 1991 unadjusted for price changes, may shrink further this quarter before rebounding later in 2011 as reconstruction kicks in.

Capital investment dropped 0.9 percent in the first quarter, the first decline in six quarters, today’s data showed.

“It’s hard to think that companies will become aggressive about increasing business spending when uncertainties remain strong,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo.

Consumer spending fell 0.6 percent in the January-March period from the previous three months, the second straight quarter of declines, today’s report showed. In a sign that customers are returning to shops, nationwide department store sales fell 1.5 percent in April, easing from March’s 14.7 percent decline, a report today showed.

Highlighting the disaster’s effect on companies, Toyota Motor, the world’s largest carmaker, said last week that profit slumped 77 percent to the lowest in 1 1/2 years for the three months ended March 31. The earthquake forced it to halt production and depressed its domestic sales.

Nippon Steel Corp., Japan’s biggest steelmaker, said in April it posted a worse-than-expected loss in the fiscal fourth- quarter after the temblor damaged plants. The company’s output is expected to drop by 7 percent to 8 percent this quarter as damaged carmaker facilities damp orders.

http://www.bloomberg.com/news/2011-05-19/japan-s-economy-shrinks-more-than-forecast.html