| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Quarter over Quarter | 0.2% | -0.1% to 0.3% | 0.2% | 0.7% | 0.5% |
| Annual Rate | 0.6% | -0.5% to 1.2% | 0.9% | 2.9% | 2.2% |
| Year over Year | 0.3% | 0.0% to 0.4% | 0.3% | -1.0% | -1.1% |
Highlights
Japan's third quarter economic growth slowed to 0.2% on quarter, on pullbacks in business investment and public works spending, as expected, but an unexpected slip in external demand amid sapping Chinese demand and global uncertainties was offset by surprisingly solid consumer spending on vehicles amid high costs for necessities and stormy Q3 weather.
At a glance, the Q3 performance released by the Cabinet Office on Friday was not so bad as some economists had feared, with its annualized rate firmer at +0.9% vs. consensus +0.6%, but it was partly buoyed by the downward revision to the Q2 gross domestic product to +0.5% q/q from +0.7% and to +2.2% annualized from +2.9%.
The Q2 rebound was still led by private consumption, which accounts for about 55% of the GDP, and solid corporate capital investment. In the January-March quarter, the economy slumped 0.6% (annualized -2.4%) for the first contraction in two quarters, hit by suspended output at Toyota group factories over a safety test scandal that had a widespread impact beyond the auto industry.
Domestic demand added a strong 0.6 percentage point to total domestic output in Q3 (well above the consensus call of +0.1 point) after boosting the Q2 GDP by 0.7 point. External demand (exports minus imports) pushed down the overall GDP figure by 0.4 point, instead of the median forecast of +0.1 point, marking the third straight quarter of providing a negative contribution.
Looking ahead, the economy in October-December is expected to show only modest growth as many households have been struggling to make ends meet amid high costs for food and fuels even though large firms are raising wages to cope with widespread labor shortages. Firms may increase investment in capacity in Q4 compared to Q3.
From a year earlier, the economy posted its first increase in three quarters, up 0.3% as projected by economists, after falling 1.0% previously.
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:
Domestic demand +0.6 point, 2nd straight rise (+0.8 point)
Private consumption +0.9%, 2nd straight rise after 4 drops (+0.7%)
Business investment -0.2%, 3rd drop in 5 quarters (+0.9%)
Public investment plus -0.9%, 4th drop in 5 quarters (+4.1%)
Private inventories +0.1 point, 2nd rise in 5 quarters (-0.1 point)
Net exports (external demand) -0.4 point, 4th drop in 5 quarters (-0.1 point)
The Cabinet Office estimates that in order for real GDP to hit the official forecast of 0.7% growth in fiscal 2024, the economy would have to grow 0.85% on quarter, or an annualized 3.5% in each of the two remaining quarters in the fiscal year ending next March. It may be too high a goal given still sluggish domestic consumption amid high costs, uncertainty over global growth and what many fear as an inflationary economic policy under President-elect Trump, who has promised to levy high tariffs on U.S. imports and boost growth with tax cuts.
At a glance, the Q3 performance released by the Cabinet Office on Friday was not so bad as some economists had feared, with its annualized rate firmer at +0.9% vs. consensus +0.6%, but it was partly buoyed by the downward revision to the Q2 gross domestic product to +0.5% q/q from +0.7% and to +2.2% annualized from +2.9%.
The Q2 rebound was still led by private consumption, which accounts for about 55% of the GDP, and solid corporate capital investment. In the January-March quarter, the economy slumped 0.6% (annualized -2.4%) for the first contraction in two quarters, hit by suspended output at Toyota group factories over a safety test scandal that had a widespread impact beyond the auto industry.
Domestic demand added a strong 0.6 percentage point to total domestic output in Q3 (well above the consensus call of +0.1 point) after boosting the Q2 GDP by 0.7 point. External demand (exports minus imports) pushed down the overall GDP figure by 0.4 point, instead of the median forecast of +0.1 point, marking the third straight quarter of providing a negative contribution.
Looking ahead, the economy in October-December is expected to show only modest growth as many households have been struggling to make ends meet amid high costs for food and fuels even though large firms are raising wages to cope with widespread labor shortages. Firms may increase investment in capacity in Q4 compared to Q3.
From a year earlier, the economy posted its first increase in three quarters, up 0.3% as projected by economists, after falling 1.0% previously.
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:
Domestic demand +0.6 point, 2nd straight rise (+0.8 point)
Private consumption +0.9%, 2nd straight rise after 4 drops (+0.7%)
Business investment -0.2%, 3rd drop in 5 quarters (+0.9%)
Public investment plus -0.9%, 4th drop in 5 quarters (+4.1%)
Private inventories +0.1 point, 2nd rise in 5 quarters (-0.1 point)
Net exports (external demand) -0.4 point, 4th drop in 5 quarters (-0.1 point)
The Cabinet Office estimates that in order for real GDP to hit the official forecast of 0.7% growth in fiscal 2024, the economy would have to grow 0.85% on quarter, or an annualized 3.5% in each of the two remaining quarters in the fiscal year ending next March. It may be too high a goal given still sluggish domestic consumption amid high costs, uncertainty over global growth and what many fear as an inflationary economic policy under President-elect Trump, who has promised to levy high tariffs on U.S. imports and boost growth with tax cuts.
Market Consensus Before Announcement
Japan's gross domestic product for the July-September quarter is forecast to post a sharp slowdown, up just 0.2% on quarter, or an annualized 0.6%, as consumers remained frugal amid high costs for necessities that were aggravated by a rare, acute rice supply shortage and business investment is believed to have declined.
The expected sluggish growth follows a strong 0.7% rebound (annualized 2.9%) in the April-June quarter, which was led by private consumption, which accounts for about 55% of the GDP, and solid corporate capital investment. In the January-March quarter, the economy slumped 0.6% (annualized 2.4%) for the first contraction in two quarters, hit by suspended output at Toyota group factories over a safety test scandal that had a widespread impact beyond the auto industry.
Domestic demand is expected to add a slight 0.1 percentage point to total domestic output in Q3 after boosting the Q2 GDP by 0.8 point while external demand (exports minus imports) is also seen lackluster, adding just 0.1 point for the first rise in three quarters after trimming Q2 GDP by 0.1 point.
Looking ahead, the economy in October-December is expected to show only modest growth as many households are struggling to make ends meet amid high costs for food and fuels even though large firms are raising wages to cope with widespread labor shortages. Firms may increase investment in capacity in Q4 compared to Q3.
From a year earlier, the economy is forecast to have posted its first increase in three quarters, up 0.3%, after falling 1.0% previously.
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 +0.2% 2nd straight rise after 4 drops (+0.9%)
Business investment -0.3%, 3rd drop in 5 quarters (+0.8%)
Public investment plus -0.8%, 4th drop in 5 quarters (+4.1%)
Private inventories 0.0 point, flat after 4th drop in 5 quarters (-0.1 point)
Net exports (external demand) +0.1 point, 2nd rise in 5 quarters (-0.1 point)
Domestic demand +0.1 point, 2nd straight rise after 4 drops (+0.8 point)
The expected sluggish growth follows a strong 0.7% rebound (annualized 2.9%) in the April-June quarter, which was led by private consumption, which accounts for about 55% of the GDP, and solid corporate capital investment. In the January-March quarter, the economy slumped 0.6% (annualized 2.4%) for the first contraction in two quarters, hit by suspended output at Toyota group factories over a safety test scandal that had a widespread impact beyond the auto industry.
Domestic demand is expected to add a slight 0.1 percentage point to total domestic output in Q3 after boosting the Q2 GDP by 0.8 point while external demand (exports minus imports) is also seen lackluster, adding just 0.1 point for the first rise in three quarters after trimming Q2 GDP by 0.1 point.
Looking ahead, the economy in October-December is expected to show only modest growth as many households are struggling to make ends meet amid high costs for food and fuels even though large firms are raising wages to cope with widespread labor shortages. Firms may increase investment in capacity in Q4 compared to Q3.
From a year earlier, the economy is forecast to have posted its first increase in three quarters, up 0.3%, after falling 1.0% previously.
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 +0.2% 2nd straight rise after 4 drops (+0.9%)
Business investment -0.3%, 3rd drop in 5 quarters (+0.8%)
Public investment plus -0.8%, 4th drop in 5 quarters (+4.1%)
Private inventories 0.0 point, flat after 4th drop in 5 quarters (-0.1 point)
Net exports (external demand) +0.1 point, 2nd rise in 5 quarters (-0.1 point)
Domestic demand +0.1 point, 2nd straight rise after 4 drops (+0.8 point)
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.
