| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Quarter over Quarter | -0.4% | -0.8% to -0.2% | -0.5% | 0.1% | 0.0% |
| Annual Rate | -1.6% | -3.3% to -0.7% | -2.0% | 0.4% | 0.0% |
| Year over Year | -0.2% | -0.3% to 0.1% | -0.2% | 1.2% |
Highlights
Japan's gross domestic product for the January-March quarter posted its first contraction in two quarters, down 0.5 percent on quarter, or an annualized 2.0 percent, as suspended output at Toyota group factories over a safety test scandal triggered a widespread slump beyond the auto industry after the economy narrowly averted a second straight contraction in the final quarter of 2023. The decline was slightly larger than the median forecast of 0.4 percent on quarter (forecasts ranged from 0.8 percent to 0.2 percent decreases), or 1.6 percent annualized (3.3 percent to 0.7 percent drops).
The fourth quarter GDP's slight 0.1 percent growth on quarter, or an annualized 0.4 percent, was now revised down to be flat in both measures. In October-December, a solid rebound in business investment and a rise in net exports due to a temporary surge in services income (copyright royalties) were offset by declines in consumption and public works as well as a downwardly revised fall in private-sector inventories. The initial estimate for the quarter reported in February was a 0.1 percent slip, or 0.4 percent contraction annualized.
The Econoday Consensus Divergence Index stands at minus 27, staying below zero, which indicates the Japanese economy has been performing worse than expected. Excluding the impact of inflation, the index is at minus 16.
From a year earlier, the economy fell 0.2 percent in January-March for the first drop in three years, as expected, following a 1.2 percent rise in October-December.
The Cabinet Office estimates that in order for real GDP to hit the official forecast of 1.3 percent growth for fiscal 2024, the economy will have to grow 0.75 percent on quarter, or an annualized 3.1 percent in each quarter of the fiscal year that began in April. The economy grew a real 1.2 percent in fiscal 2023, below the official forecast of a 1.6 percent rise after expanding 1.6 percent (revised up from 1.5 percent) in fiscal 2022, which was still under the official projection of 1.7 percent. It followed a 2.8 percent gain in fiscal 2021 and decreases of 3.9 percent in fiscal 2020 and 0.8 percent in fiscal 2019.
Looking ahead, the economy in April-June is expected to show modest growth (about 1.7 percent annualized) as auto production resumed in March but consumer spending remains sluggish amid elevated costs for food and other necessities. Both households and businesses are concerned that the weakness of the yen, whose value has hit 34-year low against the dollar, will cause a resumed spike in import costs at a time when the prices for some commodities are rising.
Domestic demand trimmed the first quarter GDP by 0.2 percentage point, weaker than the median forecast of minus 0.1 point. It lowered fourth quarter growth by 0.2 point (revised down from a negative 0.1 point). A larger-than-expected rebound in public works spending was more than offset by a pullback in business investment and weaker-than-expected consumer spending.
Private consumption, which accounts for about 55 percent of GDP, fell 0.7 percent for a fourth straight quarterly decline, coming in much weaker than the median projection of a 0.2 percent fall (and the lowest forecast a 0.5 percent drop) and following a 0.4 percent drop (revised down from a 0.3 percent dip) in the fourth quarter. Consumption pushed down the first quarter GDP by 0.4 percentage point after making a negative 0.2-point contribution (revised down from minus 0.1 point) to the total domestic output in the previous quarter.
Business investment in equipment slumped 0.8 percent on quarter in January-March, firmer than the median forecast of a 1.2 percent drop. It was in payback for a sharp 1.8 percent rebound (revised down from a 2.0 percent jump) in October-December, the first rise in three quarters that was backed by continued solid growth in sales and profits. Capex made a negative 0.4-point contribution to the first quarter GDP after providing a positive 0.3-point contribution the previous quarter.
Net exports of goods and services -- exports minus imports -- made a negative 0.3 percentage point contribution to the total domestic output, coming in slightly firmer than the median forecast of a 0.4-point decrease after raising the GDP by 0.2 point in the previous quarter, which was supported by a one-off surge in services income. Japanese exports of goods and services posted their first quarterly decline in four quarters in the January-March quarter GDP, down 5.0 percent, after rising 2.8 percent in October-December. Imports also fell 3.4 percent after rising 1.8 percent in the previous quarter. The number of visitors from other countries has recovered to pre-Covid levels and their spending is counted as Japanese exports of services. By contrast, exports of goods have been sluggish amid a weak tone in the European economy and despite signs of a pickup in China.
Private sector inventories provided provide a positive 0.2 percentage point contribution to the first quarter GDP, compared to the median forecast of plus 0.1 point, after trimming the fourth quarter GDP by 0.2 point (revised down from minus 0.1 point).
Public works spending posted its first quarterly rise in three quarters, up 3.1 percent in January-March, backed by the stimulative effects of the fiscal 2023 budget, after falling 0.2 percent (revised up from a 0.8 percent drop) in October-December. It was much stronger than the median forecast of a 1.8 percent rise. Public investment made a positive 0.2-point contribution to the first quarter GDP after lowering the total output by a slightly negative 0.0 point (revised up from minus 0.1 point) in the previous quarter.
The fourth quarter GDP's slight 0.1 percent growth on quarter, or an annualized 0.4 percent, was now revised down to be flat in both measures. In October-December, a solid rebound in business investment and a rise in net exports due to a temporary surge in services income (copyright royalties) were offset by declines in consumption and public works as well as a downwardly revised fall in private-sector inventories. The initial estimate for the quarter reported in February was a 0.1 percent slip, or 0.4 percent contraction annualized.
The Econoday Consensus Divergence Index stands at minus 27, staying below zero, which indicates the Japanese economy has been performing worse than expected. Excluding the impact of inflation, the index is at minus 16.
From a year earlier, the economy fell 0.2 percent in January-March for the first drop in three years, as expected, following a 1.2 percent rise in October-December.
The Cabinet Office estimates that in order for real GDP to hit the official forecast of 1.3 percent growth for fiscal 2024, the economy will have to grow 0.75 percent on quarter, or an annualized 3.1 percent in each quarter of the fiscal year that began in April. The economy grew a real 1.2 percent in fiscal 2023, below the official forecast of a 1.6 percent rise after expanding 1.6 percent (revised up from 1.5 percent) in fiscal 2022, which was still under the official projection of 1.7 percent. It followed a 2.8 percent gain in fiscal 2021 and decreases of 3.9 percent in fiscal 2020 and 0.8 percent in fiscal 2019.
Looking ahead, the economy in April-June is expected to show modest growth (about 1.7 percent annualized) as auto production resumed in March but consumer spending remains sluggish amid elevated costs for food and other necessities. Both households and businesses are concerned that the weakness of the yen, whose value has hit 34-year low against the dollar, will cause a resumed spike in import costs at a time when the prices for some commodities are rising.
Domestic demand trimmed the first quarter GDP by 0.2 percentage point, weaker than the median forecast of minus 0.1 point. It lowered fourth quarter growth by 0.2 point (revised down from a negative 0.1 point). A larger-than-expected rebound in public works spending was more than offset by a pullback in business investment and weaker-than-expected consumer spending.
Private consumption, which accounts for about 55 percent of GDP, fell 0.7 percent for a fourth straight quarterly decline, coming in much weaker than the median projection of a 0.2 percent fall (and the lowest forecast a 0.5 percent drop) and following a 0.4 percent drop (revised down from a 0.3 percent dip) in the fourth quarter. Consumption pushed down the first quarter GDP by 0.4 percentage point after making a negative 0.2-point contribution (revised down from minus 0.1 point) to the total domestic output in the previous quarter.
Business investment in equipment slumped 0.8 percent on quarter in January-March, firmer than the median forecast of a 1.2 percent drop. It was in payback for a sharp 1.8 percent rebound (revised down from a 2.0 percent jump) in October-December, the first rise in three quarters that was backed by continued solid growth in sales and profits. Capex made a negative 0.4-point contribution to the first quarter GDP after providing a positive 0.3-point contribution the previous quarter.
Net exports of goods and services -- exports minus imports -- made a negative 0.3 percentage point contribution to the total domestic output, coming in slightly firmer than the median forecast of a 0.4-point decrease after raising the GDP by 0.2 point in the previous quarter, which was supported by a one-off surge in services income. Japanese exports of goods and services posted their first quarterly decline in four quarters in the January-March quarter GDP, down 5.0 percent, after rising 2.8 percent in October-December. Imports also fell 3.4 percent after rising 1.8 percent in the previous quarter. The number of visitors from other countries has recovered to pre-Covid levels and their spending is counted as Japanese exports of services. By contrast, exports of goods have been sluggish amid a weak tone in the European economy and despite signs of a pickup in China.
Private sector inventories provided provide a positive 0.2 percentage point contribution to the first quarter GDP, compared to the median forecast of plus 0.1 point, after trimming the fourth quarter GDP by 0.2 point (revised down from minus 0.1 point).
Public works spending posted its first quarterly rise in three quarters, up 3.1 percent in January-March, backed by the stimulative effects of the fiscal 2023 budget, after falling 0.2 percent (revised up from a 0.8 percent drop) in October-December. It was much stronger than the median forecast of a 1.8 percent rise. Public investment made a positive 0.2-point contribution to the first quarter GDP after lowering the total output by a slightly negative 0.0 point (revised up from minus 0.1 point) in the previous quarter.
Market Consensus Before Announcement
Japan's gross domestic product for the January-March quarter is forecast to post the first contraction in two quarters, down 0.4 percent on quarter, or an annualized 1.6 percent, as suspended output at Toyota group factories over a safety test scandal triggered a widespread slump beyond the auto industry after the economy narrowly averted a second straight contraction in the final quarter of 2023.
The expected fall in the GDP would follow a slight 0.1 percent rise on quarter in the fourth quarter, or an annualized 0.4 percent, which was revised up from the initial estimate of a 0.1 percent slip, or 0.4 percent contraction annualized. The meager growth in January-March was led by a solid rebound in business investment and a rise in net exports due to a temporary surge in services income (copyright royalties), which offset the drag from declines in consumption and public works.
From a year earlier, the economy is expected to have slipped 0.2 percent in January-March for the first drop in three years, following a 1.2 percent rise in October-December.
Looking ahead, the economy in April-June is expected to show modest growth as auto production resumed in March but consumer spending remains sluggish amid elevated costs for food and other necessities. Both households and businesses are concerned that the weakness of the yen, whose value has hit 34-year low against the dollar, will cause a resume spike in import costs at a time when the prices for some commodities are rising.
Consensus forecasts for key components in percentage change on quarter except for private inventories and net exports, whose contributions are in percentage points. Figures in the previous quarter are in parentheses:
Private consumption minus 0.2, 4th straight drop (minus 0.3)
Business investment minus 1.2, 1st drop in 2 quarters (plus 2.0)
Public investment plus 1.8, 1st rise in 3 quarters (minus 0.8)
Net exports (external demand) minus 0.4, 1st drop in 2 quarters (plus 0.2)
Domestic demand minus 0.1, 4th straight drop (minus 0.1)
The expected fall in the GDP would follow a slight 0.1 percent rise on quarter in the fourth quarter, or an annualized 0.4 percent, which was revised up from the initial estimate of a 0.1 percent slip, or 0.4 percent contraction annualized. The meager growth in January-March was led by a solid rebound in business investment and a rise in net exports due to a temporary surge in services income (copyright royalties), which offset the drag from declines in consumption and public works.
From a year earlier, the economy is expected to have slipped 0.2 percent in January-March for the first drop in three years, following a 1.2 percent rise in October-December.
Looking ahead, the economy in April-June is expected to show modest growth as auto production resumed in March but consumer spending remains sluggish amid elevated costs for food and other necessities. Both households and businesses are concerned that the weakness of the yen, whose value has hit 34-year low against the dollar, will cause a resume spike in import costs at a time when the prices for some commodities are rising.
Consensus forecasts for key components in percentage change on quarter except for private inventories and net exports, whose contributions are in percentage points. Figures in the previous quarter are in parentheses:
Private consumption minus 0.2, 4th straight drop (minus 0.3)
Business investment minus 1.2, 1st drop in 2 quarters (plus 2.0)
Public investment plus 1.8, 1st rise in 3 quarters (minus 0.8)
Net exports (external demand) minus 0.4, 1st drop in 2 quarters (plus 0.2)
Domestic demand minus 0.1, 4th straight drop (minus 0.1)
Definition
Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy.
Description
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.
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.
