Pick up in net exports supports Japanese Q3 GDP growth
Japan confirms seventh consecutive quarter of positive growth at 1.4% q/q in Q3.
The preliminary estimate for Japan third quarter real GDP growth came in at 1.4% quarter-on-quarter (q/q) annualised.
This is above trend growth, which is thought to be around 1% and the first positive seven quarter run for real GDP growth in 16 years, although it was slightly weaker quarter-on quarter than expected.
Improvement in external demand
In contrast to growth in the second quarter, growth in the third quarter was driven by a pick up in external demand, which offset a slowdown in domestic demand.
Net exports contributed two percentage points (pp) to growth, an upswing from a negative contribution to growth in the second quarter. Inventory investment also contributed strongly to growth as firms build up their stock.
Temporary drop in private consumption
Private consumption fell 1.8% q/q annualised and, in turn, was a 1pp drag on real GDP growth. This was in part due to strong consumption last quarter (at 2.8% annualised) and also weather related.
We expect the weakness in consumption to be temporary as total income continues to pick up and household sentiment remains high.
Growth in capital expenditure was not enough to offset the 9.7% q/q fall in public investment, following the significant 25.3% q/q pick up in the last quarter.
Meanwhile, the GDP deflator, a measure of inflation, turned positive this quarter to 0.1% y/y from -0.4% in the second quarter.
This communication is marketing material. The views and opinions contained herein are those of the named author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds.
This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy.
The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.
Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall.
Any sectors, securities, regions or countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.
The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors.
Issued by Schroder Unit Trusts Limited, 31 Gresham Street, London, EC2V 7QA. Registered Number 4191730 England. Authorised and regulated by the Financial Conduct Authority.