Japan's economy grew an annualized 21.4 percent in the third quarter, data showed on Monday, rebounding sharply from a record postwar slump in a sign the country is gradually emerging from the damage caused by the COVID-19 pandemic.

Still, many analysts expect any further rebound in the economy to be moderate as persistent weakness in consumption and a resurgence in coronavirus infections at home and abroad clouds the outlook.

The expansion in the gross domestic product (GDP) compared with a median market forecast for an 18.9 percent gain, Cabinet Office data showed. It marked the first increase in four quarters and followed a 28.8 percent plunge in April-June.

On a quarter-on-quarter basis, the economy grew 5.0 percent, faster than forecasts of 4.4 percent, and pulling out of recession.

Private consumption, which makes up more than half of the economy, rose 4.7 percent in July-September from the previous quarter, rebounding from a plunge in April-June blamed on lockdown measures aimed at preventing the spread of the virus.

External demand — or exports minus imports — added 2.9 percent points to GDP growth thanks to a rebound in overseas demand that pushed up exports by 7.0 percent.

But capital expenditure fell 3.4 percent, shrinking for a second straight quarter, suggesting that uncertainty over the pandemic's fallout was weighing on business sentiment.

Japan has so far announced two stimulus packages worth a combined $2.2 trillion to ease the pain from the health crisis, including cash payments to households and small business loans.

Prime Minister Yoshihide Suga has instructed his cabinet to come up with another package as the pandemic's damage persists.

Despite some signs of improvement in recent months, analysts expect the world's third-largest economy to shrink 5.6 percent in the current fiscal year ending in March 2021. It could take years to return to pre-COVID levels.

(Cover: Pedestrians seen wearing protective face masks following the COVID-19 outbreak, walk past a show window of a department store in Tokyo, Japan, May 18, 2020. /Reuters)