Thu Dec 07 17:50:00 CST 2017

Consensus Actual Previous
Quarter over Quarter 0.4% 0.6% 0.3%
Q/Q change - SAAR 1.5% 2.5% 1.4%
Year over Year 2.1% 1.7%

Revised estimates show Japan's gross domestic product grew by 0.6 percent on the quarter in the three months to September. This is above the preliminary estimate of 0.3 percent, published last month, and exceeds the consensus forecast of 0.4 percent.  In annualised terms, GDP grew 2.5 percent in the three months to September, compared with the preliminary estimate of 1.4 percent and the consensus forecast of 1.5 percent. In the three months to June, Japan's GDP grew 0.7 percent on the quarter (2.9 percent in annualised terms).

In year-on-year original terms, Japan's GDP grew 2.1 percent in the three months to June, up from the preliminary estimate of 1.7 percent. This is up on the 1.6 percent year-on-year growth recorded in the three months to September.

The upward revision to the headline growth estimate was mainly driven by stronger private non-residential investment, which is now estimated to have grown by 1.1 percent, up from the initial estimate of 0.2 percent, with the contribution to growth revised up from zero to 0.2 percentage points. The contribution to growth from the change in private inventories was also revised up from zero to 0.2 percentage points, while public demand is now estimated to have made a slightly smaller negative contribution. The contribution of other expenditure components was largely unchanged, with the revised estimates continuing to show that household consumption was weak and declined by 0.5 percent on the quarter.

Relative to the three months to June, today's report confirm that headline GDP growth was slightly weaker, with most major components of domestic demand also recording weaker growth. A rebound in external demand was the main factor supporting headline growth in the three months to September, with net exports making a positive contribution of 0.5 percentage points after detracting 0.2 percentage points from growth in the previous quarter.

Today's report confirms that Japan's current economic expansion has now extended to seven consecutive quarters, its longest uninterrupted period of positive growth since 2005 and 2006. Although domestic demand, was weak, this may partly have reflected the impact of adverse weather. Subsidies for fuel-efficient cars may also have "brought forward" some spending into the previous quarter when consumer spending was relatively strong.

Officials at the Bank of Japan expect the recent "moderate expansion" in Japan's economy 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. Wage data also released today were encouraging, with real average wages recording their first year-on-year increase in ten months, and base wages advancing on the year for the seventh consecutive month.

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.