Japan's economy grew slower ⁠than expected in April-June, government data showed on Monday, as private consumption softened owing to headwinds from higher raw material costs and supply disruptions linked to the Middle East war.

The annualised 1.1 percent increase in gross domestic product compared with a median market estimate of 2.0 percent growth in a Reuters poll. It also followed an upwardly revised 1.9 percent expansion in the previous quarter, extending the economy's growth ⁠streak to three consecutive quarters.

The reading translates into a ⁠quarterly rise of 0.3 percent, compared ⁠with the median estimate of a 0.5 percent increase.

Private consumption, which accounts for more than half of economic output, was ⁠flat, falling short of a market estimate of a 0.5 percent increase.

Consumption and wage trends are key factors the Bank of Japan is watching to gauge economic strength and determine the need for additional rate hikes.

Capital spending, a key driver ⁠of private demand, fell 1.2 percent in the second quarter, versus a market forecast for a 0.4 percent increase.

Net external demand, or exports minus imports, added 0.5 percentage of a point to growth.

Exports remained resilient thanks to solid US demand for Japanese hybrid vehicles and sustained global investment in artificial intelligence that supported shipments of semiconductor-related equipment and components.

Looking ahead, analysts cautioned that rising import costs and mounting upstream price pressures ⁠could eventually feed through to consumers, posing a risk to spending later this year.

Private consumption could also see a pull-back in the July-September quarter, after policy and regulatory changes temporarily boosted demand for durable goods such as automobiles and air conditioners in April-June.

A survey this month by the Japan Center for Economic Research showed 37 economists forecast ⁠annualised GDP growth to slow to an average 0.05% in the July-September quarter. (Reuters)



Edited by Altis Wong