Oct-Dec 2012 First Preliminary GDP Estimate

Negative growth for third consecutive quarter due to lower exports

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February 14, 2013

  • Masahiko Hashimoto
  • Mitsumaru Kumagai

Summary

◆The first preliminary estimate of Oct-Dec real GDP (Cabinet Office) posted a slide of 0.1% q/q, annualized at –0.4%, the third quarterly negative growth in a row, falling short of the market consensus (+0.1%; annualized at +0.4%). Domestic demand saw the first positive contribution to q/q GDP growth in two quarters (+0.1 percentage point), while foreign demand saw the third quarterly negative contribution in a row (–0.2 points), dragging down real GDP growth. The negative contribution of foreign demand was as expected. In contrast, due to the negative contribution of private inventories (–0.2 points), the positive contribution of domestic demand undershot expectations, which is responsible for the lower-than-expected growth of real GDP.


◆The first preliminary estimate confirmed persistent deterioration in the corporate sector, as evidenced by slides in exports and capex. In the household sector, the gain in personal consumption contrasted with the slide in employee compensation. As a whole, the Oct-Dec result was unfavorable. However, we expect GDP to turn around to positive growth from Jan- Mar 2013. After dragging down the economy for some time, exports will likely move toward an uptrend, supported by economic improvement in China and other Asian nations and also helped by the yen trending weaker from end-2012. Higher exports will not only push up corporate earnings, which will in turn induce capex, but also improve the household income environment, which will encourage personal consumption. Public works spending should accelerate the ongoing uptrend, spurred by government economic measures. We expect that after the short-term doldrums that started in early 2012, the economy will turn around to an expansionary phase from Jan-Mar 2013.

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