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Japanese GDP grows 2.4% on annualized basis

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GDP grows 2.4% on annualized basis



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The Yomiuri Shimbun

8:17 pm, May 20, 2015

The Yomiuri Shimbun The nation’s gross domestic product in the January-March quarter rose 0.6 percent from the previous quarter in price-adjusted real terms, marking growth for two quarters in a row, according to the preliminary figures released by the Cabinet Office on Wednesday.

On an annualized basis, the GDP increased 2.4 percent during the period — exceeding the “less than 2 percent level” forecast by major private research institutes.

The GDP increase was aided by stable individual consumption and positive growth of residential investment and capital investment.

The annualized growth rate follows the one for the same quarter a year before, which was a 4.9 percent rise.

Personal spending — accounting for 60 percent of the GDP — increased 0.4 percent, showing positive growth for three consecutive quarters.

Residential investment rose 1.8 percent after negative growth for three quarters in a row, marking the first positive growth after the consumption tax hike from 5 percent to 8 percent in April last year. The figure showed recovery from the steep reduction in home investment after last-minute home purchases before the tax hike.

At a press conference Wednesday, Economic Revitalization Minister Akira Amari said: “Private-sector demand, including individual consumption and residential investment, is seeing positive growth overall. That was a favorable result.”

However, public-sector investment fell 1.4 percent, the first decline in five quarters. Net exports — the balance of exports and imports — logged a 0.2 percent decline.

Nominal GDP, which is thought to be closer to consumers’ sentiment in their everyday lives, rose 1.9 percent, with the annualized growth rate standing at 7.7 percent. The annualized figure is second to that for the July-September 2011 period.

Meanwhile, the real GDP for fiscal 2014 decreased 1 percent from the previous fiscal year. This is the first decline since the 2 percent decline for fiscal 2009, which was affected by the 2008 collapse of Lehman Brothers. In fiscal 2014, personal spending dropped 3.1 percent and housing investment plunged 11.6 percent due to the consumption tax hike.

More strategy needed

Japan’s economy is heading toward recovery, as reflected in this year’s preliminary GDP figures for the January-March period.

But the individual consumption growth rate was unchanged from that of the previous quarter. Given that the GDP increase is mainly attributed to the expansion of off-the-shelf stock, the pace of recovery still lacks momentum.

Crude oil prices have fallen, but prices went up for many food items and other products this year. Consumer confidence has also remained lower than expected.

Record-high earnings were reported for fiscal 2014 that ended in March by many companies, most of them manufacturers, while corporate capital investment resulted in positive growth. But to this end, corporations were slow to react.

At a press conference that day, Economic Revitalization Minister Akira Amari expressed the government’s plan to urge firms to invest, saying, “Capital spending has remained weak. We’ll give a push [to corporate managers].”

In light of the weakening yen in recent months, many firms have decided to move their production bases back to Japan — but plenty of others have opted to increase overseas investments.

A fresh growth strategy is needed if the government hopes to achieve a full economic recovery led by the private sector



GDP grows 2.4% on annualized basis - The Japan News
 
Core machinery orders rebound 2.9%in March


The nation’s seasonally adjusted core machinery orders in March grew 2.9 percent from the previous month, up for the first time in two months, the Cabinet Office said Monday.
Private-sector orders excluding those for ships and power equipment — a leading indicator of corporate capital spending — came to ¥869.4 billion.

In January-March, core machinery orders expanded 6.3 percent from the previous quarter, above projected growth, thanks to a number of a large-scale deals worth more than ¥10 billion each.

The Cabinet Office left its assessment unchanged, saying that machinery orders are showing signs of moderate recovery.

Of private-sector orders in March, those from manufacturers rose only 0.3 percent from the previous month, with large-scale deals in the paper and pulp and the chemical sectors offset by a decline in orders from the food manufacturing sector.

Orders from nonmanufacturers surged 4.7 percent in March from the previous month, thanks to robust orders from the wholesale and retail sector and the agriculture, forestry and fisheries sector.


Machinery orders are generally considered to indicate the trend of capital spending three to six months ahead.

Economists believe that although corporate capital spending may stagnate temporarily due to an economic slowdown in the United States and China, it will pick up again afterward, due to a recovery in private consumption at home.

“Previously the export-oriented manufacturing sector led the nation’s corporate capital spending, but in fiscal 2015, capital spending will be led by nonmanufacturers,” said Koya Miyamae, an economist at SMBC Nikko Securities Inc.


Core machinery orders rebound 2.9% in March - The Japan News
 
"Annualized" growth rates are different from annual (e.g. YoY) growth, and also highly misleading. Far from smoothing out data, they seem to create extreme seasonal variations for Japan. Note that Japan's Q1 "annualized" growth rates have always been abnormally high: 6% in 2013 Q1 and 5.8% 2014 Q1. Yet in the end, annual growth is always significantly lower.


japan-gdp-growth-annualized.png
 
"Annualized" growth rates are different from annual (e.g. YoY) growth, and also highly misleading. Far from smoothing out data, they seem to create extreme seasonal variations for Japan. Note that Japan's Q1 "annualized" growth rates have always been abnormally high: 6% in 2013 Q1 and 5.8% 2014 Q1. Yet in the end, annual growth is always significantly lower.


japan-gdp-growth-annualized.png



The annualized rate of 2.4% is significantly higher than estimates of 1.5%.

Be that as it may, Japan's economy is growing faster than expected.

I see this a great thing.
 
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