Japan: Japanese economy expands less than expected
August 12, 2013
Second quarter national accounts data proved to be less upbeat than in the first quarter. In the second quarter, GDP jumped 2.6% over the previous quarter in seasonally adjusted annualized terms (SAAR), which represents the third consecutive increase in the country's output. However, the print represented a decline over the revised 3.8% rise recorded in the previous quarter (previously reported: +3.5% quarter-on-quarter SAAR) and fell short of market expectations of a 3.6% expansion in GDP. On an annual basis, economic activity expanded 0.9% in the second quarter (Q1: +0.3% year-on-year).
Q2 growth was mainly due to expansion of public spending, which accelerated to a 3.4% increase over the revised 0.2% increase registered in the previous quarter. Private consumption expanded 3.1% in the second quarter (Q1: +3.4% qoq SAAR). Private non-residential investment registered a 0.4% contraction, which was less than the 0.7% drop observed in Q1.
The external sector posted another strong quarter, with exports of goods and services growing at 12.5% over the previous quarter in annualized terms (Q1: 16.8% qoq SAAR). Meanwhile, imports expanded 6.2% (Q1: 4.2% qoq SAAR). As a result, the external sector's annualized net contribution to overall growth diminished from 2.1 percentage points in the first quarter to plus 1.1 percentage points in the second.
The Bank of Japan (BoJ) expects the economy to expand between 2.5% and 3.0% in the fiscal year ending in March 2014. In the following fiscal year, the BoJ sees GDP growing between 0.8% and 1.5%. FocusEconomics Consensus Forecast panellists see GDP expanding 1.7% in 2013, which is up 0.1 percentage points from last month's projection. In 2014, the panel sees the economy growing 1.6%.
Author: Carl Kelly, Economist