Japan: Second preliminary estimate for Q1 2017 real GDP to be 2.3% q-o-q annualized - Nomura
The analysis team at Nomura projects that the second preliminary estimate for real GDP growth in Q1 2017 of Japan will be 2.3% q-o-q annualized versus 2.2% q-o-q annualized in the first set of estimates.
Key Quotes
“The second preliminary GDP estimates for Q1 2017 of Japan will reflect the Financial Statements Statistics of Corporations by Industry (FSSCI), released 1 June, as well as various fundamental statistics released since the first set of preliminary GDP estimates were announced on 18 May.”
“According to the FSSCI for Q1 2017 released on 1 June, capex (nominal basis, ex software and financials & insurance, seasonally adjusted) rose 1.3% q-o-q in Q1, up for a third consecutive quarter. Capex fell 1.8% in the manufacturing sector but rose 3.0% in the nonmanufacturing sector, bringing up the overall total. Recurring profits in the nonmanufacturing sector fell 2.7% in Q1, down for a second straight quarter, but capex nevertheless increased, and we think this may reflect increased investment in automation in reaction to the labor shortages.”
“Inventory investment boosted real GDP growth (q-o-q) by 0.1 percentage point in the first preliminary estimates. Based on the FSSCI, we expect a slightly stronger boost from capex investment in the second preliminary statistics.”
“Among other demand-side items, we forecast an upward revision to public investment, reflecting fundamental statistics published since the first preliminary estimates, but a downward revision to consumer spending and housing investment. We expect overall GDP growth to be largely unchanged from the first preliminary estimates.”
“The first preliminary GDP estimates for Q1 showed favorable results for Japanese demand overall, and we expect even stronger figures in the second preliminary estimates. We also think that the recovery in external demand from H2 2016 may have fed through to domestic demand. We caution, however, that peaking growth in overseas demand could weaken the boost to GDP growth. At the same time, April consumer spending statistics show solid consumption on the supply side and the demand side, following the pattern seen in January-March. We expect focus from here to be on the pace of the slowdown in external demand and the sustainability of the recovery in domestic demand.”