Apr-Jun 2016 1st Preliminary GDP Estimate

GDP grows for second consecutive quarter; moderate expansion phase continues

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August 15, 2016

  • Shunsuke Kobayashi

Summary

◆The real GDP growth rate for Apr-Jun 2016 (1st preliminary est) grew by +0.2% q/q annualized (+0.0% q/q), while falling a bit below market consensus (+0.7% q/q annualized, +0.2% q/q). Considering the fact that some growth during the Jan-Mar period was due to extra business days gained in the leap year, we would have to conclude that current results are maintaining a firm undertone since by now the positive effects of the leap year have worn off. Looking at results by source of demand, we see that positive contributions came from growth in personal consumption, housing investment, and public investment, while declines were experienced in capex, exports, and imports.


◆Performance by demand component in the Apr-Jun 2016 results shows personal consumption up for the second consecutive quarter by +0.2% q/q. Results are seen as favorable, considering the reactionary decline after the increase gained from extra business days during the Jan-Mar period due to the leap year. Housing investment grew for the first time in three quarters at +5.0% as a result of last-minute demand which developed on the assumption that the consumption tax would again be increased in April of 2017. Capex declined for the second consecutive quarter at -0.4% q/q and shows signs of peaking out. While the extent of contribution of private sector inventory growth was slight at -0.0%pt, the final contribution was down for the fourth consecutive quarter. Meanwhile, exports declined for the first time in two quarters at -1.5% q/q.


◆We expect Japan’s economy to continue in a moderate expansion phase. However, domestic demand continues to lack strength, and with the absence of a clearly driving force in the economy, Japan may continue to face risk of a possible downturn in the future. As for overseas demand, the future of the world economy becomes increasingly uncertain with the UK decision to withdraw from the EU, and we therefore urge caution regarding possible downside risk.

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