Tue Feb 13 17:50:00 CST 2018

Consensus Actual Previous Revised
Quarter over Quarter 0.2% 0.1% 0.6%
Q/Q change - SAAR 0.9% 0.5% 2.5%
Year over Year 1.5% 2.1% 1.9%

Japan's GDP grew by 0.1 percent on the quarter in the three months to December according to preliminary estimates, down from growth of 0.6 percent in the three months to September (revised up from the initial estimate of 0.3 percent), and falling short of the consensus forecast of 0.2 percent. This gives an annualised growth rate of 0.5 percent for the three months to December, below the consensus forecast of 0.9 percent, and down from 2.5 percent in the three months to September (revised up an initial estimate of 1.4 percent).

In year-on-year original terms, GDP advanced by 1.5 percent in the three months to December, compared with an increase of 2.1 percent in the three months to September (revised from 1.7 percent).

Net exports and investment spending were the main factors driving weaker headline GDP growth in the three months to December. After boosting headline growth by 0.5 percentage points in the three months to September, net exports made zero contribution in the three months to December, mainly reflecting a strong rebound in imports. Business investment grew by 0.7 percent on the quarter, down from 1.0 percent previously, while residential investment dropped 2.7 percent on the quarter after declining 1.5 percent previously. Private consumption, in contrast, made a strong rebound after falling by 0.6 percent in the three months to September, increasing by 0.5 percent on the quarter and contributing 0.3 percentage points to headline growth. Public demand also fell by a smaller amount than it did in the previous quarter.

Revised GDP estimates for this quarter, incorporating more comprehensive information, will be published next month. If this confirms positive GDP growth in the three months to December, Japan's current economic expansion will have extended to eight consecutive quarters.

Despite the fall in headline growth in the three months to December, the rebound in consumption will likely reassure officials at the Bank of Japan that their assessment that the Japanese economy will "expand moderately" in coming quarters remains valid. The BoJ's median forecast for real GDP growth is 1.9 percent for the current fiscal year starting April 2017, 1.4 percent for the fiscal year starting April 2018, and 0.7 percent for the fiscal year starting April 2019.

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.