Thu Sep 07 18:50:00 CDT 2017

Consensus Actual Previous
Quarter over Quarter 0.7% 0.6% 1.0%
Q/Q change - SAAR 2.7% 2.5% 4.0%
Year over Year 1.4% 2.0%

Revised estimates show Japan's gross domestic product grew by 0.6 percent on the quarter in the three months to June. This is below the preliminary estimate of 1.0 percent, published last month, and just short of the consensus forecast of 0.7 percent.  In annualised terms, GDP grew 2.5 percent in the three months to June, compared with the preliminary estimate of 4.0 percent and the consensus forecast of 2.7 percent. In the three months to March, Japan's GDP grew 0.4 percent on the quarter (1.5 percent in annualised terms).

In year-on-year original terms, Japan's GDP grew 1.4 percent in the three months to June, down from the preliminary estimate of 2.0 percent. This is down on the 1.5 percent year-on-year growth recorded in the three months to March.

The downward revision to the headline growth estimate was mainly driven by weaker private non-residential investment, which is now estimated to have grown by 0.5 percent, well down on the initial estimate of 2.4 percent, with the contribution to growth revised down from 0.4 percentage points to 0.1 percentage points. Household consumption is now estimated to have grown 0.8 percent on the quarter (compared with a previous estimate of 0.9 percent), while the estimate for quarter-on-quarter growth in private residential investment has been revised down from 1.5 percent to 1.3 percent. Public demand is now estimated to have grown by 1.5 percent compared with the initial estimate for an increase of 1.3 percent. Net exports are now estimated to have detracted 0.3 percentage points from headline growth, unchanged from the preliminary estimate.

Today's report confirms that Japan's current economic expansion has now extended to six consecutive quarters, its longest uninterrupted period of positive growth since 2005 and 2006. Officials at the Bank of Japan expect this "moderate expansion" to continue in coming quarters, supported by accommodative monetary policy, large-scale fiscal stimulus, solid labour market conditions, and an expected boost to investment spending related to the 2020 Olympic games in Tokyo.

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.