Oct-Dec 2017 1st Preliminary GDP Estimate

GDP components lack strength, nominal figures edge toward negative growth for the first time in five quarters

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February 14, 2018

  • Shunsuke Kobayashi

Summary

◆The real GDP growth rate for Oct-Dec 2017 (1st preliminary est) grew for the eighth consecutive quarter by +0.5% q/q annualized (+0.1% q/q). Leaders in domestic demand were private sector final consumption and capex with the major concern being the continued negative performance of housing investment. Meanwhile, expanding consumption appeared to gain major support from replacement demand for durables. Real employee compensation shifted into minus growth leaving something to be desired in the strength of overall performance. Terms of trade worsened due to an increase in import prices centering on energy costs, while the GDP deflator fell for the first time in three quarters and nominal GDP declined for the first time in five quarters.


◆We expect Japan’s economy to continue in a moderate expansion phase. Domestic demand is expected to continue its expansion centering on personal consumption, while overseas demand is expected to maintain steady growth backed by the expansion in the world economy, providing support for Japan’s economic growth. However, caution should be observed as overseas demand still has a strong sense of uncertainty, and domestic demand may be affected by rising prices and stagnant growth in real income. Moreover, some hesitation as regards capital investment may occur due to the high yen, and housing investment could suffer a reactionary decline in response to recent growth spurred on by strategies in dealing with inheritance tax.

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