Japan's economy narrowly averted a second straight quarterly drop in October-December, and thus recession last year, as revised data for gross domestic product showed slight growth, backed by a decent but slightly smaller-than-expected upward revision to business investment and an unrevised rebound in net exports, offsetting the drag from declines in consumption and public works.

Real GDP expanded 0.1 percent on quarter in the fourth quarter, or an annualized 0.4 percent, revised up from the initial estimate of a 0.1 percent slip (0.4 percent contraction annualized). It was weaker than the median forecast of 0.3 percent growth on quarter, or an annualized 1.3 percent rise. The forecasts by 10 economists ranged from increases of 0.2 percent to 0.4 percent, or an annualized pace of 0.7 percent to 1.8 percent. Capex grew 2.0 percent on quarter (plus 0.3 point contribution) versus a preliminary 0.1 percent drop (minus 0.0); Consumption fell 0.3 percent (minus 0.1 point) versus a 0.2 percent fall (minus 0.1 point); private-sector inventories trimmed GDP by 0.1 point versus minus 0.0 point; public investment fell 0.8 percent (-0.0 point) versus a 0.7 percent drop (-0.0 point); net exports added an unrevised 0.2 point to GDP.

Preliminary data released last month showed the economy unexpectedly posted a slight contraction, pushing the economy into a mild recession amid elevated costs for daily necessities and uncertainty over global growth. GDP slumped 0.8 percent, or an annualized 3.2 percent (revised from 3.3 percent), in the third quarter.

From a year earlier, the economy grew 1.2 percent in October-December, revised up from a preliminary 1.0 percent rise, for an 11th consecutive rise following a 1.6 percent (revised down from 1.7 percent) increase in July-September. The consensus forecast was a 1.5 percent rise.

Econoday's Relative Performance Index stood at minus 1, just below zero, which indicates the Japanese economy is performing largely as expected after outperforming recently. Excluding the impact of inflation, the RPI was at minus 32.

Looking ahead, the economy in the first quarter of 2024 is expected to post only a slight increase close to zero as consumers remain frugal to cope with elevated living costs and some industries including hotels, restaurants and transport firms are losing business opportunities amid widespread labor shortages.

There are heightened expectations that the Bank of Japan may act sooner on March 18-19, instead of April 25-26, to lift the negative 0.1 percent short-term interest rate target to zero as part of its gradual process of unwinding large-scale monetary stimulus. Recent official comments point to a higher possibility of achieving stable 2 percent inflation and a reduced risk of falling back into deflation. Some major firms have already accepted demands for higher wages and better working conditions at an early stage of annual talks with unions ahead of March 13, when many large firms will respond to labor demands.

Japan's economy likely averted a second straight quarterly drop in October-December, and thus recession last year, as revised data for gross domestic product is expected to show modest growth, backed by a sharp upward revision to business investment and an unrevised rebound in net exports, offsetting the drag from declines in consumption and public works.

Real GDP is forecast to have expanded 0.3 percent on quarter in the fourth quarter, or an annualized 1.3 percent, revised up sharply from the initial estimate of a 0.1 percent slip (0.4 percent contraction annualized. Preliminary data released last month showed the economy unexpectedly posted a slight contraction, pushing the economy into a mild recession amid elevated costs for daily necessities and uncertainty over global growth. GDP slumped 0.8 percent, or an annualized 3.3 percent, in the third quarter.

Consensus forecasts for key components in percentage change on quarter except for private inventories and net exports, whose contributions are in percentage points. Preliminary figures are in parentheses.

GDP quarter on quarter: plus 0.3 percent (minus 0.1 percent)
GDP annualized: plus 1.3 percent (minus 0.4 percent)
Private consumption: minus 0.2 percent (minus 0.2 percent)
Business investment: plus 2.5 percent (minus 0.1 percent)
Public investment: minus 0.8 percent (minus 0.7 percent)
Private sector inventories: plus 0.0 point (minus 0.0 point)
Net exports (external demand): plus 0.2 point (plus 0.2 point)
Domestic demand: plus 0.2 point (minus 0.3 point)

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.