December 10, 2012
Summary
◆In the second preliminary estimate of Jul-Sep (3Q) 2012 GDP (Cabinet Office), real GDP posted a slide of 0.9% q/q, annualized at -3.5%, slightly short of the market consensus (down 0.8%; down 3.3%) but remaining flat from the first preliminary estimate. In terms of contribution to q/q growth in real GDP, domestic demand made the first negative contribution in six quarters (-0.2 percentage points) and overseas demand the second negative contribution in a row (-0.7 points). Thus, conditions surrounding real GDP were unchanged from the first preliminary estimate--where private and overseas demand dragged down the economy, although public works spending supported it--and our economic outlook remains unchanged.
◆By demand component, capex saw a minor upgrade from the first preliminary estimate (from down 3.2% q/q to down 3.0%), as capex posted a better figure in Financial Statements Statistics of Corporations by Industry for 3Q 2012 (Ministry of Finance; basic data for estimating GDP) than that assumed in the first preliminary estimate. Factoring in the same data, inventory investments also saw a minor upgrade (contribution to real GDP growth: from up 0.2 points to up 0.3 points). Meanwhile, public works spending saw a downgrade (from up 4.0% to up 1.5%), factoring in the synthetic construction indexes for September (Ministry of Land, Infrastructure, Transport and Tourism; basic data; available in Japanese). Thus, real GDP growth remained flat from the first preliminary estimate.
◆Japan’s business cycle is very likely to have peaked in March 2012 and entered a downturn. Our examination of past business cycles shows that the driver of the recovery phase has clearly changed from fiscal/monetary measures to exports since the 1990s. In the current economic cycle, the economy is very likely to break out of the bottom, accompanied by increased exports, reflecting a recovery in overseas economies, and we believe that Japan’s economy will recover moderately driven by exports from 2013 onward.
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