Sun Nov 15 17:50:00 CST 2015

Consensus Actual Previous
Quarter over Quarter -0.1% -0.2% -0.3%
Q/Q change - SAAR -0.2% -0.8% -1.2%
Year over Year 1.1% 0.9%

Third quarter gross domestic product contracted a greater than expected 0.2 percent on the quarter. Analysts expected a 0.1 percent decline. GDP contracted an annualized rate of 0.8 percent. On the year however, GDP was up 1.1 percent after increasing 1.0 percent in the second quarter. Two negative quarters means that Japan once again entered a technical recession which is described as two negative quarters of GDP.

Among its components, consumption increased 0.5 percent on the quarter but CAPEX dropped 1.3 percent. Inventories also negatively affected GDP, subtracting 0.5 percentage point from growth. Domestic demand also subtracted 0.3 percentage point.

The poor data draws into question the Bank of Japan's decision to keep policy unchanged at its October 30 meeting. Today's worse than expected result may prompt the BoJ to reconsider its options at its meeting at the end of this week.

Gross domestic product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy.

Gross domestic product is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Investors in the stock market like to see healthy economic growth because robust business activity translates to higher corporate profits. Bond investors are more highly sensitive to inflation and robust economic activity could potentially pave the road to inflation. By tracking economic data such as GDP, investors will know what the economic backdrop is for these markets and their portfolios.

The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.