0850 JST (2350GMT/1850 EST Sunday, Nov. 16) Cabinet Office releases preliminary GDP for July-September
Mace News median: -0.7% q/q (range -1.0% to -0.3%) vs. Q2 revised +0.5%; -2.7% annualized (range -3.9% to -1.2%) vs. Q2 revised +2.2%; +0.4% y/y (range +0.1% to +0.8%) vs. Q2 revised +1.7%
By Chikafumi Hodo
TOKYO (MaceNews) – Japan’s real gross domestic product is forecast to have fallen 0.7% from the previous quarter, or an annualized 2.7%, in the July–September period, marking the first contraction in six quarters.
The preliminary Q3 GDP data, due from the Cabinet Office at 0850 JST on Monday, Nov. 17 (2350 GMT / 1850 EST, Sunday, Nov. 16), are expected to show a decline driven by a pullback in exports, a sharp drop in housing investment and a drawdown in inventories.
However, the slowdown is seen as modest and does not suggest a broad-based deterioration in Japan’s economic fundamentals. Private consumption and business investment are expected to remain resilient, indicating that the underlying strength of the economy is largely intact.
Temporary Factors Behind Contraction
The contraction is largely attributed to temporary or technical factors, including a reversal of front-loaded exports to the United States ahead of new U.S. trade tariffs, a slump in housing construction following the implementation of revised building standards regulations in April, and an adjustment in inventories built up in the first half of the year. These factors are estimated to have weighed on the quarterly annualized growth rate.
Business investment is projected to have edged lower, as weaker capital goods demand was partly offset by steady spending on software and construction. Housing investment is seen plunging sharply after a rush of construction in March ahead of the regulatory change. Private inventory investment is estimated to have trimmed total domestic output by 0.2 percentage point, while public investment likely fell around 0.1%, marking a second straight quarter of modest decreases as the pace of public works slowed.
Exports are forecast to have dropped around 0.3% from the previous quarter, with the decline driven by weaker shipments to the United States, slower inbound consumption, and softer receipts of intellectual property royalties. Imports are also expected to have declined.
Domestic Demand Remains Resilient
Despite the weaker trade performance, domestic demand is expected to have provided some cushion. Private consumption likely rose about 0.2% from the previous quarter, supported by steady household spending through the summer months.
On the supply side, shipments of durable goods fell during the quarter, while non-durable goods shipments increased, pointing to resilient everyday spending. On the demand side, household spending among two-or-more-person households, excluding housing, showed solid growth from the April–June quarter.
Indicators overall suggest a mixed but stable consumption trend, underscoring the continued firmness of Japan’s domestic demand.
Consensus forecasts for key components in percentage change on quarter except for domestic demand, private inventories and net exports, whose contributions are in percentage points. Figures in the previous quarter are in parentheses: