Japan: GDP Preview – Going backwards? – ING

By FXStreet James Smith, Economist at ING, suggests that the Japanese economy appears to have contracted in the fourth quarter, driven mainly by a weather-induced fall in consumption.

Key Quotes

“Fourth quarter GDP data released at the start of next week (Sunday 2350 GMT) is likely to show that the economy ended 2015 on a sour note. Household survey data suggests that consumption, which accounts for almost 60% of GDP, contracted sharply in the final months of the year. Although consumer confidence has been relatively robust, mild weather is likely to have weighed on sales of certain goods (e.g clothing). Going forward, the outlook for consumption looks better, with lower energy prices and a slower pace of food inflation likely to provide a boost.

The outlook for investment looks less encouraging. Although profits were strong in 2015 and investment intentions appear to have remained fairly robust in the fourth quarter, a decline in capital goods shipments and new orders suggest that non-residential investment will be at best flat. However, as investment is a confidence-driven activity, lingering concerns about the external environment add downside risk to both this and future GDP releases. A further drag from industry may come from inventories which, having built up …read more

Source:: FX Street