June 7, 2017 06:50 CDT

Consensus Actual Previous
Quarter over Quarter 0.6% 0.3% 0.5%
Q/Q change - SAAR 2.4% 1.0% 2.2%
Year over Year 1.3% 1.6%

Revised estimates show Japan's gross domestic product grew by 0.3 percent on the quarter in the three months to March. This is below the preliminary estimate of 0.5 percent, published last month, and also falls short of the consensus forecast of 0.6 percent. In annualised terms, GDP grew 1.0 percent in the three months to March, compared with the preliminary estimate of 2.2 percent and the consensus forecast of 2.4 percent. In the three months to December, Japan's GDP grew 0.3 percent on the quarter (1.4 percent in annualised terms).

In year-on-year original terms, Japan's GDP grew 1.3 percent in the three months to March, down from the preliminary estimate of 1.6 percent. This is also down on the 1.6 percent year-on-year growth recorded in the three months to December.

The downward revision to the headline growth estimate was largely driven by household consumption, which is now estimated to have grown at an annualised rate of 1.1 percent (compared with a previous estimate of 1.4 percent) and to have made a positive contribution to headline quarterly growth of 0.1 percentage points (0.2 percentage points previously). Downward revisions to growth in government spending also contributed to the headline number, with public demand now estimated to have fallen by an annualised rate of 0.2 percent instead of growing by 0.4 percent.

The estimate of annualised growth in private residential investment has been revised down from 3.0 percent to 1.1 percent, but this is offset by an upward revision to the estimate for private non-residential investment from 0.9 percent to 2.5 percent. Meanwhile, the change in private inventories is now estimated to have lowered headline growth by 0.1 percentage point after previously being estimated to have increased it by this amount. Revised estimates for net exports were little changed from preliminary estimates.

Despite the downward revision to headline growth, today's report confirms that GDP has now expanded - albeit modestly - for five consecutive quarters. Japan's economy had not previously gone five quarters without at least one quarter of negative GDP growth since 2004. Annual data shows that Japan's GDP expanded by 1.2 percent in the fiscal year ending March 2017, down slightly from the preliminary estimate of 1.3 percent.

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.