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Japan 2014 Q3 first preliminary GDP estimates – Nomura

FXStreet (Barcelona) - Tomo Kinoshita, Research Analyst at Nomura notes Japan’s Real GDP is down q-q for a second straight quarter but states that there is no need for pessimism on the outlook for the economy.

Key Quotes

“Although the economy lacked momentum in Q3, we see no need for pessimism over the outlook for the economy. Consumer spending recovered in August and September, albeit gradually, off a bottom in July.”

“In Jul-Sep (2014 Q3), real GDP was -0.4% q-q, or -1.6% q-q annualized, which came as a surprise, as this is well below both the consensus forecast (Bloomberg survey median) of +2.2% and our estimate of +1.4%. This marks the second consecutive quarter of contraction, following on the Q2 decline in the wake of the consumption tax hike.”

“Although GDP thus continued to shrink in Q3, much of this is due to inventory adjustments, with inventory making q-q contributions of -0.6ppt q-q and -2.6ppt q-q annualized. However, even excluding inventory adjustments, real final demand grew only 1.0% q-q annualized.”

“On the political front, a delay of the next consumption tax hike combined with dissolution of the lower house of the Diet and a snap election has become the main scenario, and with Q3 real GDP contracting, that scenario has become even more likely in our view.”

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