July 3, 2020 / 6:47 AM / a month ago

Japan's May household spending, machinery orders seen falling as virus hits: poll

TOKYO (Reuters) - Japan’s household spending and machinery orders likely extended declines in May, providing further evidence that the coronavirus crisis is hurting the economy.

FILE PHOTO: Smoke rises from a factory in front of Mount Fuji during the sunset at Keihin industrial zone in Kawasaki, Japan January 16, 2017. REUTERS/Toru Hanai/File Photo

Analysts predict the economy is on course for a significant contraction in the second quarter as the coronavirus outbreak hits global demand for goods and keeps businesses closed.

Household spending is expected to have fallen 12.2% in May from a year earlier, which would be the fastest pace of decline since comparable data became available in 2001, the poll of 16 economists showed. It would also follow an 11.1% drop in April.

The nation’s state of emergency lasted from April through to late May.

“Although retailers started to reopen after the emergency was lifted, consumers stayed cautious about the virus and their spending appears to have been subdued,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research.

The poll also found machinery orders, a leading indicator of capital expenditure, declined 5.4% in May from the previous month, after a 12.0% drop in April.

“Firms strengthened their stance and refrained from spending due to worsening business results and cash flow, as well as uncertainty over the outlook,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

Japan’s current account surplus likely stood at 1.09 trillion yen ($10.14 billion) in May, supported by income from overseas investments, the poll showed, from 262.7 billion yen in April.

The Bank of Japan’s corporate goods prices index (CGPI) likely slipped 1.9% from a year earlier in June after a 2.7% drop in May, the poll found.

The pace of decline likely slowed after oil prices picked up, analysts said.

Reporting by Kaori Kaneko; Editing by Sam Holmes

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