First quarter real Japanese GDP registered a surprise expansion. But digging below the surface and there isn’t that much to get excited about. Underlying demand remains weak both in terms of household spending and government. It was left to net exports – where imports declined at a faster rate than weak exports – and a further and faster inventory build to provide the statistical boost.
March output data was strong on the manufacturing side, amid inventory building ahead of the (since extended) end-March Brexit deadline. Construction and services ended the quarter on a weak note, leading to an overall dip in GDP in the final month of Q1.
Strong advance Q1 GDP numbers, but the devil is in the detail with a further big inventory build and a particularly strong contribution in net trade both driving up the q/q ann. growth rate to 3.2%, easily beating forecasts. The y/y rate also hit 3.2%, the highest since Q2 2015.
Trade and output data surprising to the upside, boosted by what looks to be activity as firms seek to get ahead of the curve pending the previously expected March 29 Brexit data – which the March PMIs also showed amid a record increase in inventories (and not just compared to UK history, but globally).
Final US GDP numbers for Q4 revised down a little bit but not that much of a change in year-on-year terms, with growth overall running a shade below 3% which isn’t bad. Government was weak but investment still looks strong and inventory build also helped headline. In fact, investment looks too strong given how corporate profits have performed. Ditto for employment vs. profits.