Just a few months ago, Japan's economy had come to a crashing halt as global demand dried up and a strong yen exacerbated an already bad situation. Companies responded by quickly slashing production, and GDP tumbled at an almost unheard of double-digit rate.
Fast-forward to June and suddenly the clouds are lifting on the economy, at least for the moment.
Yesterday's sizable jump in Japanese industrial production was followed up by the first increase in household spending in 16 months, while the manufacturing PMI is nearing 50.
Household spending increased by 0.3% versus a year ago, well ahead of expectations of a drop of over 1%. Most analysts credited the government's stimulus package, but after bottoming at -5.9% four months ago, the trend has been moving in the right direction.
In the meantime, Japan's PMI increased 1.6 points to 48.2, its best reading in over a year. The survey of manufacturers remains below the expansion-contraction line of 50 but has displayed marked improvement after bottoming at a wretched -29.6 in January.
The PMI is tracking industrial production higher as companies replenish depleted stockpiles. And the improvement bodes well for the Tankan survey out tomorrow, which is a closely-followed quarterly survey of business confidence.
However, as we get past this re-stocking cycle, continued growth in production will likely moderate unless demand in Europe and the US accelerates.
That brings to the jobless report. Like the US Japan has been wrestling with rising unemployment. The latest figures show the jobless rate rose from 5.0% to a five-year high of 5.2%.
Source: Bloomberg News
The jobs-to-applicant ratio fell to 0.44, the worst reading since the survey began in 1963, the Labor Ministry said.
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