Japan: Second GDP release leaves growth broadly unchanged in Q1
June 10, 2019
Although comprehensive data for the first quarter corroborated that the economy expanded for the second consecutive quarter, it also confirmed that the print was mostly led by a sharp drop in imports. According to revised data released by the Cabinet Office on 10 June, GDP rose 2.2% over the previous quarter in seasonally-adjusted annualized terms (SAAR), a stronger expansion than the 2.1% increase initially estimated (Q4: +1.8% SAAR). In annual terms, GDP expanded 0.9% in Q1, accelerating from Q4’s 0.3% increase.
A stronger-than-expected expansion in capital fixed investment (Q1: +2.2% SAAR; previously reported: +0.9% qoq SAAR), mostly due to an upswing in capital expenditure in the non-manufacturing sector, led the mild improvement observed in the second estimate. Dynamics in private consumption and government spending improved only marginally in Q1, while the external sector’s contribution to overall growth was left unchanged at 1.6 percentage points.
Looking forward, Takashi Miwa, an analyst at Nomura, notes that:
“The updated estimates of Jan-Mar GDP seem to indicate that real capex has been holding up well. For that reason, we think GDP statistics are now less likely to be a deciding factor in whether the government chooses to go through with the planned consumption tax hike. However, with US-China trade friction having flared up again since early May, we see little cause for optimism that capex can stay on such a healthy trajectory going forward.”
Japan GDP Forecast
The GDP forecast among BoJ members is between 0.7% and 0.9% for FY 2019 and between 0.8% and 1.1% for FY 2020. FocusEconomics Consensus Forecast panelists see GDP expanding 0.7% in calendar year 2019, which is down 0.1 percentage points from last month’s projection. In 2020, the panel sees the economy growing 0.6%.