| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Quarter over Quarter | 0.6% | 0.2% to 0.8% | 0.8% | -0.7% | -0.6% |
| Annual Rate | 2.3% | 0.6% to 3.0% | 3.1% | -2.9% | -2.3% |
| Year over Year | -1.2% | -1.5% to -1.0% | -0.8% | -0.7% | -0.9% |
Highlights
Japan's gross domestic product for the April-June quarter posted a stronger-than-expected rebound after suffering its first contraction in two quarters in January-March, up a preliminary 0.8 percent on quarter, or an annualized 3.1 percent, as consumption and business investment picked up after having been hit by suspended output at Toyota group factories over a safety test scandal. Public works spending also marked a sharp rebound.
Thanks to robust private consumption, growth came in above the median forecast of a 0.6 percent rise on quarter and at the top end of the economist forecasts that ranged from 0.2 percent to 0.8 percent, beating a consensus 2.3 percent rise at an annualized pace and the forecast range of 0.6 percent to 3.0 percent. The rebound in the second quarter GDP recovered all of an upwardly revised 0.6 percent drop, or an annualized 2.3 percent in the first quarter.
Domestic demand added 0.9 percentage point to total domestic output, above the median forecast of plus 0.6 point, after pulling down the first quarter GDP by 0.1 points. External demand (exports minus imports) is still sluggish, trimming overall growth by 0.1 points in line with consensus after making a negative 0.5-point contribution in the prior 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, the volumes of goods exports are falling as the effects of the past rate hikes by major central banks are weighing on global growth.
Looking ahead, the economy in July-September is expected to show moderate growth as large firms are raising wages at the fastest pace in 33 years and investing in capacity to cope with labor shortages. Real wages rose 1.1 percent on the year in June, marking the first rise in 27 months, after falling 1.3 percent the previous month.
From a year earlier, the economy fell 0.8 percent (consensus was a 1.2 percent drop) in April-June for the second consecutive drop after slipping 0.9 percent in January-March (revised from a 0.8 percent fall).
The Econoday Consensus Divergence Index stands at plus 21, comfortably above zero, which indicates the Japanese economy is performing better than expected after outperforming with a slight margin. Excluding the impact of inflation, the index is at plus 40.
The Cabinet Office estimates that in order for real GDP to hit the official forecast of 0.9 percent growth in fiscal 2024 (revised down from 1.3 percent last month), the economy will have to grow 0.51 percent on quarter, or an annualized 2.1 percent in each quarter of the three quarters left in the fiscal year ending next March, which might be challenging for Japan's wobbly recovery from the pandemic.
The economy grew a real 0.8 percent (revised down from 1.2 percent) in fiscal 2023, which is now clearly below the official forecast of a 1.6 percent rise, after expanding 1.6 percent in fiscal 2022, which was slightly under the official projection of 1.7 percent. It followed a 3.1 percent gain in fiscal 2021 and decreases of 3.9 percent in fiscal 2020 and 0.8 percent in fiscal 2019.
In the second quarter of 2024, private consumption, which accounts for about 55 percent of GDP, rose 1.0 percent for the first increase in five quarters, coming in much stronger than the median projection of a 0.5 percent rise. It followed a 0.6 percent drop in the first quarter. Toward the end of the second quarter, the killer heat wave boosted demand for air conditioners and refrigerators while a late start to the rainy season in many regions propped up demand for beverages, snacks, eating out and summer clothing. Consumption pushed up the second quarter GDP by 0.5 percentage points after making a negative 0.3-point contribution in the previous quarter.
Business investment in equipment rebounded 0.9 percent on quarter in April-June, slightly above the median forecast of a 0.8 percent rise. It recovered from a 0.4 percent fall in January-March but was slower than the 2.1 percent rise in October-December. Capex made a positive 0.2-point contribution to the second quarter GDP after providing a negative 0.1-point contribution the previous quarter. Capital investment, amid labor shoratges, is generally supported by demand for automation.
Private sector inventories provided a negative 0.1 percentage point contribution to the second quarter GDP, compared to the median forecast of minus 0.1 points, after pushing up the first quarter GDP by 0.3 points. Public works spending posted a sharp 4.5 percent surge (consensus was a 4.1 percent jump), backed by the stimulative effects of the fiscal 2024 budget, after slumping 1.1 percent in January-March. Public investment made a positive 0.2-point contribution to the second quarter GDP after lowering the total output by a slightly negative 0.1 points in the previous quarter.
Thanks to robust private consumption, growth came in above the median forecast of a 0.6 percent rise on quarter and at the top end of the economist forecasts that ranged from 0.2 percent to 0.8 percent, beating a consensus 2.3 percent rise at an annualized pace and the forecast range of 0.6 percent to 3.0 percent. The rebound in the second quarter GDP recovered all of an upwardly revised 0.6 percent drop, or an annualized 2.3 percent in the first quarter.
Domestic demand added 0.9 percentage point to total domestic output, above the median forecast of plus 0.6 point, after pulling down the first quarter GDP by 0.1 points. External demand (exports minus imports) is still sluggish, trimming overall growth by 0.1 points in line with consensus after making a negative 0.5-point contribution in the prior 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, the volumes of goods exports are falling as the effects of the past rate hikes by major central banks are weighing on global growth.
Looking ahead, the economy in July-September is expected to show moderate growth as large firms are raising wages at the fastest pace in 33 years and investing in capacity to cope with labor shortages. Real wages rose 1.1 percent on the year in June, marking the first rise in 27 months, after falling 1.3 percent the previous month.
From a year earlier, the economy fell 0.8 percent (consensus was a 1.2 percent drop) in April-June for the second consecutive drop after slipping 0.9 percent in January-March (revised from a 0.8 percent fall).
The Econoday Consensus Divergence Index stands at plus 21, comfortably above zero, which indicates the Japanese economy is performing better than expected after outperforming with a slight margin. Excluding the impact of inflation, the index is at plus 40.
The Cabinet Office estimates that in order for real GDP to hit the official forecast of 0.9 percent growth in fiscal 2024 (revised down from 1.3 percent last month), the economy will have to grow 0.51 percent on quarter, or an annualized 2.1 percent in each quarter of the three quarters left in the fiscal year ending next March, which might be challenging for Japan's wobbly recovery from the pandemic.
The economy grew a real 0.8 percent (revised down from 1.2 percent) in fiscal 2023, which is now clearly below the official forecast of a 1.6 percent rise, after expanding 1.6 percent in fiscal 2022, which was slightly under the official projection of 1.7 percent. It followed a 3.1 percent gain in fiscal 2021 and decreases of 3.9 percent in fiscal 2020 and 0.8 percent in fiscal 2019.
In the second quarter of 2024, private consumption, which accounts for about 55 percent of GDP, rose 1.0 percent for the first increase in five quarters, coming in much stronger than the median projection of a 0.5 percent rise. It followed a 0.6 percent drop in the first quarter. Toward the end of the second quarter, the killer heat wave boosted demand for air conditioners and refrigerators while a late start to the rainy season in many regions propped up demand for beverages, snacks, eating out and summer clothing. Consumption pushed up the second quarter GDP by 0.5 percentage points after making a negative 0.3-point contribution in the previous quarter.
Business investment in equipment rebounded 0.9 percent on quarter in April-June, slightly above the median forecast of a 0.8 percent rise. It recovered from a 0.4 percent fall in January-March but was slower than the 2.1 percent rise in October-December. Capex made a positive 0.2-point contribution to the second quarter GDP after providing a negative 0.1-point contribution the previous quarter. Capital investment, amid labor shoratges, is generally supported by demand for automation.
Private sector inventories provided a negative 0.1 percentage point contribution to the second quarter GDP, compared to the median forecast of minus 0.1 points, after pushing up the first quarter GDP by 0.3 points. Public works spending posted a sharp 4.5 percent surge (consensus was a 4.1 percent jump), backed by the stimulative effects of the fiscal 2024 budget, after slumping 1.1 percent in January-March. Public investment made a positive 0.2-point contribution to the second quarter GDP after lowering the total output by a slightly negative 0.1 points in the previous quarter.
Market Consensus Before Announcement
Japan's gross domestic product for the April-June quarter is forecast to post a modest rebound after suffering its first contraction in two quarters in January-March, up 0.6 percent on quarter, or an annualized 2.3 percent, as consumption and business investment picked up after having been hit by suspended output at Toyota group factories over a safety test scandal. Public works spending is also seen rebounding after a sharp drop.
The expected rebound in the second quarter GDP is unlikely to recover all of the sharp decline of 0.7 percent, or an annualized 2.9 percent in the first quarter, as elevated costs are hurting consumer spending. Domestic demand is expected to add 0.6 percentage point to total domestic output after pulling down the first quarter GDP by 0.4 point while external demand (exports minus imports) is still sluggish, trimming overall growth by 0.1 point after making a negative 0.4-point contribution in the prior quarter. Looking ahead, the economy in July-Septmeber is expected to show moderate growth as large firms are raising wages at the fastest pace in 33 years and investing in capacity to cope with labor shortages but real wages are set to show a slight gain after more than two years of year-over-year decreases.
From a year earlier, the economy is expected to have fallen 1.2 percent in April-June for the second consecutive drop after slipping 0.7 percent in January-March.
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 plus 0.5, 1st rise in 5 quarters (minus 0.7)
Business investment plus 0.8, 1st rise in 2 quarters (minus 0.4)
Public investment plus 4.1, 1st rise in 4 quarters (minus 1.9)
Private inventories minus 0.1, 1st drop in 2 quarters (plus 0.3)
Net exports (external demand) minus 0.1, 2nd straight drop (minus 0.4)
Domestic demand plus 0.6, 1st rise in 5 quarters (minus 0.4)
The expected rebound in the second quarter GDP is unlikely to recover all of the sharp decline of 0.7 percent, or an annualized 2.9 percent in the first quarter, as elevated costs are hurting consumer spending. Domestic demand is expected to add 0.6 percentage point to total domestic output after pulling down the first quarter GDP by 0.4 point while external demand (exports minus imports) is still sluggish, trimming overall growth by 0.1 point after making a negative 0.4-point contribution in the prior quarter. Looking ahead, the economy in July-Septmeber is expected to show moderate growth as large firms are raising wages at the fastest pace in 33 years and investing in capacity to cope with labor shortages but real wages are set to show a slight gain after more than two years of year-over-year decreases.
From a year earlier, the economy is expected to have fallen 1.2 percent in April-June for the second consecutive drop after slipping 0.7 percent in January-March.
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 plus 0.5, 1st rise in 5 quarters (minus 0.7)
Business investment plus 0.8, 1st rise in 2 quarters (minus 0.4)
Public investment plus 4.1, 1st rise in 4 quarters (minus 1.9)
Private inventories minus 0.1, 1st drop in 2 quarters (plus 0.3)
Net exports (external demand) minus 0.1, 2nd straight drop (minus 0.4)
Domestic demand plus 0.6, 1st rise in 5 quarters (minus 0.4)
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.
