TOKYO, Nov 5 (Reuters) – Japan’s household spending fell in September as consumers remained cautious about COVID-19, reinforcing views the world’s third-largest economy contracted in the third quarter.

The data underscored the need for policymakers to shore up domestic consumption as the global supply crunch hits the export-reliant economy.

Spending fell 1.9% year-on-year in September, after a 3.0% decrease in August, government data showed on Friday. It was a better reading than a median market forecast for a 3.9% slip in a Reuters poll.

In seasonally adjusted month-on-month terms, spending jumped 5.0% in September, marking the first increase in five months, beating expectations for 2.8% growth.

Many economists expect a contraction in Japan’s third-quarter output, due in part to disappointing industrial output figures, which kept falling on car production cuts. read more

Beyond carmakers, supply shortages in semiconductors and other components produced in coronavirus-hit Southeast Asia have caused a ripple effect in other parts of the Japanese economy. Growth in exports has slowed while private consumption stagnated because of car sales slumps. read more

The government is due to release a preliminary gross domestic product estimate for July-September on Nov. 15.

To prop up Japan’s relatively tepid economic recovery, Prime Minister Fumio Kishida pledged earlier this week to compile a “large-scale” stimulus package in mid-November. read more

Reporting by Kantaro Komiya; Editing by Sam Holmes and Richard Pullin

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