Japan’s economy grew at the fastest pace in more than two years during the three months ended June, notching a sixth straight quarter of expansion as domestic demand took off and exports contracted.
Gross domestic product grew by an annualised 4 per cent in the three months ended June, according to a preliminary estimate from Japan’s Cabinet Office. That was well up from revised growth of 1.5 per cent in the March quarter (previously 1 per cent) and came in far above a median forecast of 2.5 per cent from economists surveyed by Reuters.
Quarter-on-quarter GDP rose 1 per cent in Q2, up from a revised 0.4 per cent rise in the previous quarter (previously 0.3 per cent) and well ahead of a median forecast of 0.6 per cent from economists.
Domestic demand grew 1.3 per cent compared to the March quarter, a substantial jump from the previous quarter’s rise of 0.2 per cent. Private consumption likewise rose 0.9 per cent last quarter, more than double the 0.4 per cent pace of growth in the three months ended March and adding half a percentage point to headline GDP.
Private non-residential investment climbed 2.4 per cent quarter on quarter from 0.9 per cent in the previous three months, while growth in government consumption grew 0.3 per cent, recovering from contraction of 0.1 per cent in the previous period.
Exports of goods and services fell 0.5 per cent on a quarterly basis, however, compared to 1.9 per cent growth in the three months prior. A fall in net exports pulled the headline growth figure down 0.3 percentage points.
Ahead of the release, analysts at Barcalys had estimated GDP would grow an annualised 2.5 per cent (0.6 per cent quarter-on-quarter), largely driven higher by private consumption but offset partially by weak external demand.
“Looking forward, we expect real GDP to rise an annualized 1.3% in Q3, 0.9% in Q4, and 1.0% in Q1 2018 on a q/q basis,” they wrote. “For Q3, we believe external demand will reverse to a positive contribution and anticipate a continued economic boost from last fiscal year’s second supplementary budget of 11 October 2016″.
Japan’s producer prices rose for a sixth straight month in July at an annualised pace of 2.6 per cent, beating expectations of a 2.3 per cent rise with the equal-fastest growth since November 2014.