Japan: Q2 GDP data to continue showing moderate economic expansion – Nomura

Japan’s second preliminary GDP estimates for 2018 Q2 are due to be released on Monday 10 September and analysts at Nomura estimate that the second preliminary estimate for real GDP growth in 2018 Q2 will be +2.3% q-q annualized, versus +1.9% q-q annualized in the first set of estimates.

Key Quotes

“We think the FSSCI results will result in a downward revision for inventory of works in progress and raw materials in the second set of estimates, on which basis we forecast that inventory investment will push real GDP down by 0.2ppt q-q.”

“In the first preliminary GDP estimates, private-sector capex came in at +2.0% q-q (nominal basis, +1.3% on a real basis), but according to the FSSCI, capex (nominal basis, ex software and financials & insurance, seasonally adjusted) rose a sharp 6.9%, and we thus expect an upward revision to +3.6% on a real basis in the second set of estimates. We therefore expect an upward revision for real GDP growth overall, and think the figures will show ongoing modest economic expansion.”

“We expect modest growth to continue in Q3 despite downside risks to external demand

Industrial production, retail sales value, and exports are Japanese economic indicators for July 2018 that have already been released, and we note that the data was generally weak. In particular, the weakness of exports in trade statistics and in the new export orders index in the Japan manufacturing Purchasing Managers’ Index (PMI) points to downside risks for external demand in 2018 Q3. That said, the survey of manufacturers’ production forecasts suggests a modest increase in output in Q3, and thus we see no need for unbridled pessimism about production activity.”