INTERNATIONAL
Come 2017 and India might lose $2 billion or more in terms of garment and fabric exports owing to the Trans-Pacific Partnership (TPP) being implemented among the 12 member nations. These include the US, Canada, Japan, Australia, New Zealand, Vietnam, Malaysia and South Korea, besides a few Latin American countries. TPP member countries are supposed to source 75 per cent of raw materials such as yarn and fabric within themselves, if they are to export apparel. With India not being part of the TPP, the country could lose in terms of yarn exports to Vietnam and other TPP member countries as well as garment exports to the US, as these would now shift to other TPP member nations. According to a senior official at the Apparel Export Promotion Council (AEPC), while the TPP is yet to be ratified, the agreement is likely to be implemented by 2017. “India exports $200-300 million worth of cotton yarn to Vietnam, which would be impacted since the latter would now source the same from within the TPP members,” the AEPC official added.
According to textile and apparel experts, India would have to expedite work on the free trade agreement (FTA) with Europe to salvage the loss of opportunity because of TPP. “About 45 per cent of India's apparel exports go to Europe. If and when the TPP is implemented, India could salvage the loss to some extent by expediting an FTA with Europe,” the AEPC official added. What could also work in favour of India’s apparel sector is the rising costs in China, which could shift apparel exports business from the neighbouring country to India. “When TPP gets implemented, India could lose business worth $1-2 billion. Already, investment have begun happening in TPP member nations like Vietnam. However, there is a business opportunity which India could exploit against China. The Chinese costs have risen four-fold compared to India. Hence, India could continue to invest on larger capacities and attract global apparel business that would have otherwise gone to China,” said Prashant Agarwal, joint managing director at Wazir Advisors. India’s overall apparel exports as on date stands at $17 billion.
SOURCE: The Business Standard
Texfair 2016, an international exhibition of textile machinery, accessories and spares, is scheduled between May 20 and 23 at the Codissia Trade Fair Complex. Organised by the Southern India Mills’ Association (SIMA), this fair, the 10th edition in its series, will have 220 exhibitors displaying their products and services, in 231 stalls. Apart from leading textile machinery, spares and accessories manufacturers and suppliers from Tamil Nadu, display of products from States such as Gujarat, Delhi, Goa, Punjab and Maharashtra as well as international participants are expected at this fair, a SIMA release said. Appealing to textile mills to visit the expo, SIMA Chairman Senthilkumar said: “Mills, on an average, spend 2.5-3.0 per cent of their annual turnover on spares and accessories and plough back 4-6 per cent of the turnover on modernisation. Texfair would therefore be an ideal platform for the mills to zero in on their requirements, meet suppliers and plan their investments prudently.” The organisers are expecting around 1 lakh visitors during the four days. Seminars on topics such as ‘Value addition opportunities in weaving’, ‘A right choice for value addition and diversification – Technical Textiles’ and ‘Improving energy efficiency and productivity in Textile Mills’ are planned on Day 1.
SOURCE: The Hindu Business line
Ship turnaround time in Kamarajar Port has gone up significantly during the first three quarters of 2015-16, as compared to 2014-15, according to data by the Shipping Ministry. The average ship turnaround time, an important benchmark of a port’s efficiency, increased significantly to 1.80 days during April to December 2015 as against 0.08 days in 2014-15 at the Kamarajar Port to the North of Chennai, according to the Ministry.
Poor scheduling
The steep increase in the turnaround time – the total time a vessel spends at a port right from entry to exit – is due to improper scheduling by importers, leading to bunching of ships. Low productivity of ships and idle time due to crane or conveyor stoppages are the other key reasons, according to MA Bhaskarachar, Chairman-cum-Managing Director of Kamarajar Port Ltd. However, there has been improvement in the timing in the last two months as compared to the previous months, he told BusinessLine. The port mainly handles coal for the Tamil Nadu Electricity Board, and also for private power plants and cement factories. It also handles petroleum, oil and lubricants and automobiles. Captive users have been asked to schedule their vessels as per need and not cause bunching of ships. They have also been asked to bring efficient vessels and discharge cargo quickly by fixing crane and conveyor problems, he said. Boston Consulting Group has developed a mechanism to measure and monitor productivity, which is now being reviewed by the Shipping Ministry on a daily basis at all the ports, he said. The capacity of Kamarajar Port is being utilised almost to the full due to rapid growth in cargo in the last three years. Capacity augmentation is the key to reducing turnaround time, which is under way, said K Ravichandran, Senior Vice-President and co-Head (Corporate Ratings), ICRA Ltd. Longer waiting period for ships than assumed as part of ship charter agreement could lead to demurrages, which will lead to higher logistics cost. It will be difficult to attribute a number as there are too many variables, which impact the same, he said.
Charges for demurrage
At Kamarajar Port, there is no demurrage charge for automobiles for up to 15 days. From 16 to 20 days, it is ₹24 per vehicle per day and from 21-25 days, it is ₹48. In the case of timber logs, the demurrage charge payable per wharfage unit (per cubic meter) per day is free up to seven days. From 8-15 days, it is ₹13 and for 16-26 days, it is ₹26, according to information in the KPL website.
SOURCE: The Hindu Business Line
The Shipping Ministry has notified the final rescinding of six rules under the Merchant Shipping Act, 1958. These rules are Merchant Shipping (Safety Convention Certificates) Rules, 1975; Merchant Shipping (Radio Direction Finders) Rules, 1968; Merchant Shipping (Distress Messages and Navigational Warnings) Rules 1964; Merchant Shipping (Muster) Rules 1968; Merchant Shipping (Pilot Ladder) Rules 1967; Life-boatmen's (Qualifications and Certificates) Rules 1963. Earlier, seven obsolete rules were rescinded through a notification on November 17, 2015. With the latest order, the Ministry has so far rescinded 13 rules under the Merchant Shipping Act, 1958. Many of the old rules have become redundant and are causing delay. The context, purpose and objectives of the rules and regulations were studied and 13 were found obsolete. It was decided to rescind them in keeping with the government's motto of minimum government, maximum governance. The officials expressed the hope that the new step would simplify the legislative framework governing merchant shipping sector and streamline the processes and procedures.
‘Not much difference’
However, shipping experts are of the view that the current move does not make any significant difference to the industry, but it should be supported so that DG Shipping will be encouraged to bring Indian maritime legislation up to international standards. There is need to strengthen the manpower at DG Shipping. The under-staffed agency, which is responsible for regulating the industry, is now more concerned with managing their workload, experts said, adding that recruitment of more surveyors would free up senior management to focus on regulations and modernisation. All maritime legislations such as Indian Ports Act, Major Port Trust Act and Merchant Shipping Act are outdated, they added.
SOURCE: The Hindu Business Line
With the global crude oil prices rising to six-month high, the finance ministry is considering reducing the excise duty on petrol and diesel to cushion inflation. After assuming charge in May 2014, the Narendra Modi-led government took the benefit of drastic fall in crude oil prices and hiked the excise duty on auto fuel several times to garner up to `70,000 crore in a full year. When asked if his ministry is considering revision of excise duty, revenue secretary Hasmukh Adhia maintained that the scenario depends on international market. “There could be downward revision also. It all depends. It (duty hike) may have given good collections, but we cannot allow inflation to go out of hand. We have to be careful about inflation,” Adhia told FE. The secretary, however, did not divulge if there is a threshold crude oil price crossing which would force North Block to reduce excise duty on fuel. The excise duty levied by the centre for petrol is around `21.48/litre an increase of 126.6% against `9.48//litre in July 2014. In case of diesel, it has been hiked 386.8% to `17.33/litre now against `3.56/litre in July 2014.
Recently, Goldman Sachs said supply disruptions from Nigeria, which is Africa’s biggest crude oil producer, would lead to a supply deficit. This triggered the prices to move northwards and touch six-month high. On Wednesday morning, benchmark Brent for July delivery climbed eight cents, or 0.16% to $49.36/barrel. Petroleum minister Dharmendra Pradhan maintains that government has passed 60% of the benefit of fall in crude oil prices to consumers while the remaining 40% is being utilised for infrastructure development. However, the observation made by the the 12th report submitted on May 3 by the standing committee on petroleum & natural gas does not match Pradhan’s claim. The Standing Committee reports reveals that for the period from July 2014 till February 2016, the Indian basket of crude oil has dropped 71.47% .On the other hand, the petrol prices across the metros witnessed a reduction of 18-23%. “The committee observes that the retail prices of petrol and diesel in the country have not been reduced to the extent of the reduction in international prices as a result of increase in central and state taxes’ component on petroleum products,” the panel said. The wholesale price index-based inflation turned positive after a gap of 17 months, rising 0.34% year-on-year in April against -0.85% in the previous month, as food and manufactured items turned dearer while deflation in fuel products narrowed sharply.
SOURCE: The Financial Express
The rupee remains within the 66-67 range and is currently testing the lower end of this range. There are early warning signals from the chart of the currency heading to break 67 anytime soon and drop further. The next move after the break below 67 could be swift as there has been a prolonged sideways consolidation. The rupee fell to a low of 67 on Wednesday and closed at 66.98, down 0.63 per cent for the week. The dollar index (94.94) surged over a per cent from the low of 96.68 breaking above the key resistance at 94 in the past week. The data releases in the past week on the domestic front were also not very supportive for the rupee. Both the wholesale price index (WPI) and the consumer price index (CPI) inflation rose in April thereby reducing the hopes of an immediate rate cut by the RBI in June. The WPI turned positive after being in the negative territory for 17 months. The WPI rose to 0.34 per cent from minus 0.85 per cent in March and the CPI to 5.39 per cent from 4.83 per cent in the same period. The Index of Industrial Production (IIP) grew at a slower pace of 0.1 per cent in March compared a 2 per cent growth a month earlier. All the weak data releases coupled with the stronger dollar index capped the upside in the rupee and dragged it lower in the past week. Foreign portfolio investors (FPIs) selling $559 million in Indian debt during the week added fuel to the negative sentiment in the currency. If the FPI selling intensifies further, then the rupee could come under more pressure. There is no major domestic macro economic data release scheduled this week. So, the movement in the rupee would be largely influenced by that of the dollar index.
Dollar index outlook
The dollar index can move up to test the 95.20-95.35 resistance zone. A strong break above 95.35 will see the index surging to 96 in the coming days. Such a rally in the dollar index may add pressure on the Indian rupee and can drag it lower. Strong support is in between 94.50 and 94.35 and then at 94. Only a decisive fall below 94 will turn the outlook negative for the dollar index.
Rupee outlook
Though the rupee continues to retain its 66-67 range, the outlook is turning bearish. Both the 200-day moving average and a strong long-term trend line resistance have halted the corrective rally in the rupee that had begun from the February low of 68.79. The price action since March reflects a rounding pattern and is suggesting a turnaround. Immediate support is at 67.10, a break below which can take the rupee lower to 67.5 immediately. Further break below 67.5 can see the rupee weakening to 68 thereafter. It will also increase the danger of the rupee revisiting 69 levels going forward. There are strong resistances on the chart between 66.50 and 66.35. This resistance zone is likely to cap the upside in the rupee going forward. The rupee can gain strength to test 66 or higher levels only if it breaches above 66.35. But from the charts there seems to be low possibility of such a break.
SOURCE: The Hindu Business Line
Thailand has called for speeding up free-trade talks with India , saying the key details of the long-awaited pact should be settled first, leaving minor contentious issues for later discussions. Commerce minister Apiradi Tantraporn, who held talks with India's ambassador to Thailand Bhagwant Singh Bishnoi yesterday, said, "The Thai side first wants to settle key details of the long-awaited free-trade pact, leaving minor contentious issues for later discussion." She said both the countries have agreed to accelerate the completion of the Thai-India FTA after implementing the Early Harvest Programme back in 2004 covering 82 items. "With disagreement on some topics, Thailand thinks both countries should finalise the agreement in some parts and continue negotiating on the remaining topics," she said. The minister further said that Thai firms are keen to join India's Make in India, Smart Cities and Economic Corridor schemes as they see greater business opportunities amid the strong growth of Indian economy. Thailand and India signed a framework agreement covering the liberalisation of trade in goods, services and investment on October 9, 2003. It was agreed that Thailand and India would begin talks and establish a free trade agreement (FTA) by 2010. Both the countries initially agreed to enact an early harvest scheme (EHS), meaning agreements on one or more topics must be concluded before the scheduled completion of a multi-issue round. The agreement specified tariff reductions under the EHS for 82 items, including fruits, processed food products, gems and jewelery, iron and steel products, auto parts, electronic goods and electric appliances. Tariffs on these products were eliminated on Sept 1, 2006. India and Thailand have also agreed to support the Asean-India FTA and the negotiation of the Regional Comprehensive Economic Partnership by this year. Sources said Asean-India FTA in some ways had overtaken the India-Thailand FTA. India feels Bangkok should be responsive to its demands in the FTA in services sector, the sources told PTI. India is Thailand's 15th-biggest trading partner and largest in South Asia . Over the last five years, annual two-way trade averaged $8.47 billion. In 2015, two-way trade reached $7.92 billion, making up 1.9 per cent of Thailand's exports. Thailand enjoyed a trade surplus with India of $2.67 billion last year.
SOURCE: The Economic Times
India is working on a mechanism to boost cooperation amongst small and medium enterprises in the five-nation BRICS to promote joint ventures and share expertise on strengthening the sector. New Delhi, which holds the Presidency of the BRICS this year, is drafting a framework for a joint growth strategy for micro, small and medium enterprises (MSMEs) in the region. “The framework for cooperation amongst MSMEs, which will identify the relative strengths of each country and also possible areas of joint ventures, will be discussed at the next meeting of officials in June and hopefully finalised at the BRICS ministerial meet in October,” a government official told BusinessLine . MSMEs in Brazil, for instance, are highly successful in participating in government procurements, he said, adding that they “capture almost 90 per cent of the business. Other countries could draw from Brazil’s legislative frameworks and other policy initiatives to help their small industry also get a chunk of government business.” The BRICS grouping of five emerging economies — Brazil, Russia, India, China and South Africa — together account for a GDP of over $16 trillion, which is about half that of the seven major advanced economies. More than 40 per cent of the BRICS economies are driven by the MSME sector, according to government estimates. The Commerce and Industry Ministry is also holding discussions with the industry to give a final shape to its proposal of putting in place a BRICS portal for addressing non-tariff measures (NTMs) that hamper trade between the BRICS. Exporters’ body FIEO is one of the industry bodies giving inputs for the proposed portal. “One of the biggest problems faced by exporters in the five countries is the lack of knowledge on various non-tariff measures (NTMs), such as new standards or specifications. Most of the times they get to know about the NTMs only when their goods are rejected. If this issue is addressed, it will serve as a big incentive for industry in the five nations to trade with each other,” said Ajay Sahai of FIEO.
SOURCE: The Hindu Business line
India needs to improve its ease of doing business, which continues to lag behind that of G20 (Group Of Twenty, a group of finance ministers and central bank governors from 19 of the world's largest economies, and the European Union) to attract foreign businesses to invest in the country, Arun M Kumar, director-general of the US (United States) and Foreign Commercial Service, said on Wednesday. Speaking at an industry session organised by YES Bank and Indo-American Chamber of Commerce, Kumar said data pointed to a correlation between better ease of doing business and higher levels of economic growth, even among Indian states. According to a study by World Bank last year, Gujarat, Andhra Pradesh, and Jharkhand topped the list of states in this regard. Currently, the Department of Industrial Policy and Promotion (DIPP) has formulated 340 parameters, on which states have been asked to update their performance till June 30. Kumar said ease of doing business represented a major stumbling block to India-US business and trade prospects, which he said had massive potential in e-commerce and travel and tourism sectors. He said the US had invested in Indian e-commerce startups and 1.2 million American tourists had visited India. The defence and aerospace industry was pointed out by Kumar as another important segment which had a lot of headroom for growth. India sources 12 per cent of its defence procurements from the US. Kumar said trade between the countries would have to take into account the realities of the Trans Pacific Partnership, the mega trade deal between pacific nations like Japan, Austalia, Canada and the United States, among others.
Apart from trade itself, he said standards in trade would need to be revisited by India. "The TPP agreement has set strong standards in labor and environment compliance, which will affect global standards as well", Kumar said. On the Intellectual Property Rights (IPR) policy recently released by the government, Kumar said centralizing the copyright and patent regimes under DIPP and improving co-ordination between the Centre and states on compliance have been a welcome move. The policy is expected to strengthen the IPR regime in the country as well as improve available infrastructure to generate higher levels of intellectual property. However, India continues to be placed on a Priority Watch List by the United States on account of their assessment of India's IPR protection being inadequate. Earlier this week, Commerce and Industry Minister Nirmala Sitharaman had said the US Special 301 report on IPR is a "unilateral" move and no country has the oversight on domestic policy of other nations. Kumar also welcomed other policy actions, such as the bankruptcy law being passed.
SOURCE: The Business Standard
The international crude oil price of Indian Basket as computed/published today by Petroleum Planning and Analysis Cell (PPAC) under the Ministry of Petroleum and Natural Gas was US$ 46.72 per barrel (bbl) on 18.05.2016. This was higher than the price of US$ 46.62 per bbl on previous publishing day of 17.05.2016.
In rupee terms, the price of Indian Basket increased to Rs. 3126.44 per bbl on 18.05.2016 as compared to Rs. 3110.66 per bbl on 17.05.2016. Rupee closed weaker at Rs 66.91 per US$ on 18.05.2016 as against Rs 66.72 per US$ on 17.05.2016. The table below gives details in this regard:
|
Particulars |
Unit |
Price on May 18, 2016 (Previous trading day i.e. 17.05.2016) |
Pricing Fortnight for 16.05.2016 (28 Apr to 11 May, 2016) |
|
Crude Oil (Indian Basket) |
($/bbl) |
46.72 (46.62) |
43.00 |
|
(Rs/bbl |
3126.44 (3110.66) |
2859.50 |
|
|
Exchange Rate |
(Rs/$) |
66.91 (66.72) |
66.50 |
SOURCE: PIB
Five of New Zealand's largest corporates are working together to find new ways to reuse employee uniforms and reduce textile waste, the website scoop.co.nz has reported. Air New Zealand, Fonterra, New Zealand Post, Skycity Auckland and The Warehouse Group have set up a working group to look at what to do with old uniforms that have been replaced. Collectively these organisations produce more than 60,000 uniforms every year, presenting an opportunity to establish an environmentally and commercially sustainable business solution. The Formary, which is expert in textile fibre recovery and re-engineering, is working with the five organisations and leading the project. The Formary's founder Bernadette Casey said technical challenges are often difficult to solve in isolation and the business partnership is a good idea. “These companies are leading the way in solving what has been a largely ignored problem - growing textile waste. It's hugely exciting to be involved in discovering new ways to extract the greatest value from garments, in a collaborative way,” said Ms Casey. "This involves deconstructing the garments and re-processing the fibres into a range of new products. We'll be looking to work with New Zealand companies with the capability to do this." “We want to create a step change in reusing textile waste,” says Dawn Baggaley, Corporate Sustainability Manager at New Zealand Post. “We've been working on this problem for some time and knew other corporates were too, so reached out to them to initiate this project. We're fortunate to be working with an innovative group of businesses who are all interested in the environmental impacts of their operations. There's real leadership and commitment amongst the group.” The group aims to complete the research and identify solutions later this year.
SOURCE: Fibre2fashion
Switzerland’s textile machinery producers as long term partners of Iranian textile companies are eager to play a major role in their renewed growth as the textile industry of Iran is ready for a new beginning and determined to achieve future progress in technology and global market penetration, following the recent ending of international sanctions which hampered its continued development. At the two day seminar held in Tehran on April 25-26, 2016, organized by Swissmem, the Swiss national textile machinery representative body, the seminar featured a strong presence from the leading technology providers, including 40 percent of the association’s membership. The seminar attracted a total of 350 delegates —companies were from the capital city itself, as well as from other textile manufacturing centers, including Isfahan, Yazd and Mashad. Swissmem president Ernesto Maurer reported that the seminar exceeded all prior expectations, in terms of both the number and importance of the Iranian companies taking part: Before the imposition of sanctions they enjoyed a very strong business level and a good relationship with customers in Iran. This continued during the period of sanctions, but understandably at a lower level. In the new situation today, they are keen to intensify their relationship and business dealings to pre-sanction levels and beyond. Maurer identified problems with transfer of funds between the two countries as one of the major hurdles during the sanctions period. Therefore this was a key theme at the seminar, with two speeches arranged by experts on international financial transactions. They are delighted that the seminar helped to strengthen still further the already strong ties between their respective industries.
In the year 2015, export sales to Iran totaled 6.4 million Swiss Francs, Switzerland remains a significant provider of technology to the country and is anticipating the Iranian industry to account for a larger share of its global export sales total of more than 1 billion Swiss Francs in the coming years. One of the leading Swiss company representatives at the event, Christian Lerch, of Jakob Müller, reflected that the Iranian delegates showed genuine appreciation at the partnership efforts of Swissmem: Their customers were pleased that they brought a significant presence to their country in what is still a challenging business environment. From out side, it underlines the trust that we have in the country and also in the textile producers of Iran. Many of Jakob Müller customers took part, and they welcomed the chance for the exchange of technical and business information, as well as the valuable networking time and pleasant social programme for the evening. They wanted to demonstrate a real personal interest alongside the mutual business advantages. According to an expert insider, the potential of the Iran textile industry came from Mehran Zehtab, of Kian Sanat Afzar, an engineering service company which represents Swiss companies Retech, SSM and Heberlein in Iran. Zehtab said that Swissmem is always welcome and its presence is needed in Iran as they will be able to meet the requirements of their specialist areas such as synthetic fiber production and melt spinning in particular, companies in Iran are hungry for both know-how and latest technology in what is a critical and high added-value market.
SOURCE: Yarns&Fibers
Citing suggestions of the Organisation for Economic Cooperation and Development (OECD) which reportedly underlined that Trade Facilitation Agreement (TFA) of the World Trade Organisation would create international framework for reducing trade costs, the International Chamber of Commerce-Bangladesh (ICCB) recently said the WTO Trade Facilitation Agreement would reduce the ‘cost of doing business’ in the least developed countries like Bangladesh, and as such suggested implementation of TFA, which would reduce trade costs by 10 per cent. In a press release issued recently, ICCB observed that introduction of paperless business worldwide through the TFA is expected to slash the cost of doing business by 10-15 per cent. “The cost of doing business, particularly in the least developed countries like Bangladesh, is higher as importers and exporters have to pay extra money to avoid bureaucratic hassles at customs point, higher cost of transportation and processing other documents,” the ICCB press release stated, adding that a more recent OECD estimate has raised the rate of reduction of cost of doing business to 14.5 per cent. The TFA which will come into effect once ratified by at least two-third of the WTO members, contains provisions for expediting release and clearance of goods, including goods in transit, besides setting out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues, and also contains provisions for technical assistance and capacity building. “It is the first WTO agreement in which members determine their own implementation schedules and in which progress in implementation is explicitly linked to technical and financial capacity,” stated the ICCB press release, adding, “First, it provides greater legal certainty to the changes in policy. Second, it helps reform in Governments’ marshalling support from domestic constituents. Third, it helps solve a coordination problem that would have been created by different approaches to changing border procedures.”
SOURCE: The Apparel Resources
Japan's economy dodged a recession last quarter as gains in government and consumer spending compensated for a slide in business investment. Gross domestic product expanded by an annualised 1.7 per cent in the three months ended March 31, exceeding all forecasts in a Bloomberg survey of economists, a Cabinet Office report showed on Wednesday. The October-to-December quarter was revised to a 1.7 per cent contraction, worse than the previous estimate of a 1.1 per cent drop. The decline in capital spending suggested that companies remain reluctant to deploy their stockpiles of cash, and underscored that Japan has a long way to go before pulling free of the cycle of expansion and contraction that's plagued the economy for decades. The leap year provided an extra day of production and spending to bolster the data, and the outlook remains challenging given the resurgent yen and the possibility of a sales-tax hike in 2017. "The GDP figures were much stronger than expected but when you take out the leap-year effect, the true condition in Japan's economy is continuing stagnation," said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co in Tokyo. "A delay in the sales-tax hike and an economic stimulus package are becoming a done deal and today's report isn't enough to change this."
Despite more than three years of Abenomics and record monetary stimulus from the central bank, business spending fell 1.4 per cent in the first quarter from the previous three months. Private consumption rose 0.5 per cent from the previous period, when it dropped a revised 0.8 per cent. For the financial year through March, nominal GDP rose 2.2 per cent, the largest gain in data back at least through 1997. The government's ultimate goal is 3 per cent. Unadjusted for price changes, GDP rose 0.5 per cent from the previous quarter, the same as the average in the previous three years. Nominal GDP figures showed consumption, residential investment and capital spending all fell. Government spending rose. Inflation pressures are easing, with the GDP deflator rising 0.9 per cent from a year before, the least in two years. Good news on the wage front: compensation rose 0.6 per cent from the previous quarter, after a 0.5 per cent advance. Net exports contributed 0.2 percentage point to quarterly growth. "By having one extra day, people will eat more and spend more," said Kohei Iwahara, the Tokyo-based director of economic research at Natixis SA. "This seemingly trivial point can make a difference when consumer confidence is falling and wage growth is subdued."
Consumer spending, which accounts for about 60 per cent of GDP, is likely to weigh heavily on the mind of Prime Minister Shinzo Abe as he contemplates whether to delay increasing the sales tax to 10 per cent from the current 8 per cent. A previous hike on the levy in 2014 pushed the economy into recession. The Nikkei newspaper reported that Abe has decided to postpone the move and will probably make his decision public after hosting global leaders at a Group of Seven nations summit later this month. Senior officials in the ruling Liberal Democratic Party said the prime minister hasn't made a decision on the matter.
SOURCE: The Business Standard
