May 17, 2017 06:50 CDT

Consensus Actual Previous Revised
Quarter over Quarter 0.5% 0.5% 0.3%
Q/Q change - SAAR 1.9% 2.2% 1.2% 1.4%
Year over Year 1.6% 1.6% 1.7%

Japan's GDP grew by 0.5 percent on the quarter in the three months to March according to preliminary estimates, up from 0.3 percent in the three months to December (unchanged from the previous estimate), and in line with the consensus forecast. This gives an annualised growth rate of 2.2 percent for the three months to March, up from 1.4 percent in the three months to December (revised from 1.2 percent), and a little above the consensus forecast of 1.9 percent.

In year-on-year original terms, GDP advanced by 1.6 percent in the three months to March, compared with an increase of 1.7 percent in the three months to December (revised from 1.6 percent).

The main expenditure components contributing to the 0.5 percent increase in headline GDP were private consumption (0.2 percentage points) net exports (0.1 percentage points) and the change in private inventories (0.1 percentage points). Investment and government spending were flat on the quarter.

Revised GDP estimates for this quarter, incorporating more comprehensive information, will be published next month. Initial estimates for the three months to December showed 0.2 percent growth in GDP that quarter, but this was subsequently revised up to growth of 0.3 percent when final estimates were published a few weeks later.

If confirmed next month, GDP data for the three months to March shows that Japan's economy has recorded positive - albeit modest - growth for five consecutive quarters. Japan's economy has not gone five quarters without at least one quarter of negative GDP growth since 2004. Annual data shows that Japan's GDP expanded by 1.3 percent in the fiscal year ending March 2017 after growth of 1.2 percent in the fiscal year ending March 2016.

Quarterly growth in the three months to March was stronger than that recorded in the two previous quarters, and also less reliant on external demand, with private consumption recording solid growth after no change in the three months to December. Price pressures, however, remain very subdued, with the GDP deflator falling 0.8 percent on the year in the three months to March.

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.