Japan's economic growth slowed to 0.3% on quarter, or an annualized 1.2%, in the July-September period from an unrevised 0.5% q/q (2.2% annualized) in April-June in revised Q3 GDP data, which showed the growth rate was slightly higher than the initial reading of +0.2% (+0.9% annualized) released last month.

The negative contribution by net exports (exports minus imports) to total domestic output turned out to be a smaller minus 0.2 percentage point, revised up from minus 0.4 point, which offset a downward revision to domestic demand's contribution to plus 0.5 point from plus 0.6 point. Private consumption lifted GDP by 0.4 point (revised down from +0.5 point) while slight negative contribution came from both business investment (unrevised -0.0 point) and public works spending (unrevised -0.1 point).

The first decline in net exports in two quarters (vs. +1.9 points in Q2, -1.1 points in Q1) comes amid slow Chinese recovery and global uncertainties. On the upside, consumer spending was resilient thanks to vehicle purchases, marking the second straight quarterly gain, up 0.7% q/q in each of Q3 and Q2.

The Q3 growth followed a Q2 rebound, 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 an unrevised 0.6% (a revised annualized 2.2% drop) 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.

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 0.5% (revised up from +0.3%), after falling 0.9% in each of the previous two quarters.

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 over quarter: +0.3% (+0.2%)
GDP annualized: +1.2% (+0.9%)
GDP year over year: +0.5% (+0.3%)
Domestic demand: +0.5 point (+0.6 point)

Private consumption: +0.7% (+0.9%)
Business investment: -0.1% (-0.2%)
Public investment: -1.1% (-0.9%)
Private inventories: +0.2 point (+0.1 point)
Net exports (external demand): -0.2 point (-0.4 point)

Japan's economic growth slowdown to 0.2% on quarter, or an annualized 0.9%, in the July-September period from +0.5% q/q (+2.2% annualized) is forecast to show no or only a slight revision in the second reading. The preliminary Q3 GDP data released last month showed the slowing was caused by pullbacks in business investment and public works spending. 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.

The Q3 growth followed a Q2 rebound, 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.

In Q3, domestic demand added a strong 0.6 percentage point to total domestic output after boosting the Q2 GDP by 0.7 point. External demand (exports minus imports) pushed down the overall GDP figure by 0.4 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% , after falling 1.0% previously, as seen in the initial reading.

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 over quarter: +0.2% (plus 0.2%)
GDP annualized: +0.9% (+0.9%)
GDP year over year: +0.3% (+0.3%)
Private consumption: +0.9% (+0.9%)
Business investment: +0.1% (-0.2%)
Public investment: -1.1% (-0.9%)
Private inventories: +0.1 point (+0.1 point)
Net exports (external demand): -0.4 point (-0.4 point)
Domestic demand: +0.6 point (+0.6 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.