Analysts Debate Sharp Rise in 4Q GDP
Japan's GDP in the fourth quarter of 2007 rose at an annual rate of 3.7%, more than twice the level of consensus estimates. Greater outlays for factories and facilities and strong exports of cars and software helped spur the expansion. The solid performance boosted growth for the full year to 2.1%. Investors responded positively to the news, sending the Nikkei 225 up 558 points, or more than 4%.
But many analysts were skeptical. Glen Maguire, the chief Asia economist for Société Générale, said "Every now and then Japan produces an economic number that prints diametrically opposite to what common sense would suggest.” Some observers noted that consumer spending was buoyed only by high oil prices and cold weather. Government ministers were equally cautious, warning of downside risks for the economy. Other analysts expected the estimates to eventually be cut.
Still, some observers were heartened by the news. "Japan's economy may not be great, but it's never as bad as investors think,'' said Masayuki Kubota, who helps oversee $2.2 billion in assets at Daiwa SB Investments Ltd. in Tokyo. "Japan's GDP figure and the U.S. retail data are evidence for a more positive view on the market outlook today.''
One overarching -- and disconcerting -- phenomenon is the skepticism with which Japan's real GDP numbers are viewed. Some suggest that nominal GDP -- which grew more slowly in the quarter -- is less riddled by distortions and presents a more accurate picture of the economy. Takehiro Sato of Morgan Stanley notes that, while the economic cycle in the US can be traced by GDP, in Japan it's the industrial production numbers that count. All in all, although the strong 4Q GDP growth for Japan should not be ignored, it will take stronger evidence to convince analysts that the Japanese economy is doing as well as the recent news would indicate.
Japan's GDP in the fourth quarter of 2007 rose at an annual rate of 3.7%, more than twice the level of consensus estimates. Greater outlays for factories and facilities and strong exports of cars and software helped spur the expansion. The solid performance boosted growth for the full year to 2.1%. Investors responded positively to the news, sending the Nikkei 225 up 558 points, or more than 4%.
But many analysts were skeptical. Glen Maguire, the chief Asia economist for Société Générale, said "Every now and then Japan produces an economic number that prints diametrically opposite to what common sense would suggest.” Some observers noted that consumer spending was buoyed only by high oil prices and cold weather. Government ministers were equally cautious, warning of downside risks for the economy. Other analysts expected the estimates to eventually be cut.
Still, some observers were heartened by the news. "Japan's economy may not be great, but it's never as bad as investors think,'' said Masayuki Kubota, who helps oversee $2.2 billion in assets at Daiwa SB Investments Ltd. in Tokyo. "Japan's GDP figure and the U.S. retail data are evidence for a more positive view on the market outlook today.''
One overarching -- and disconcerting -- phenomenon is the skepticism with which Japan's real GDP numbers are viewed. Some suggest that nominal GDP -- which grew more slowly in the quarter -- is less riddled by distortions and presents a more accurate picture of the economy. Takehiro Sato of Morgan Stanley notes that, while the economic cycle in the US can be traced by GDP, in Japan it's the industrial production numbers that count. All in all, although the strong 4Q GDP growth for Japan should not be ignored, it will take stronger evidence to convince analysts that the Japanese economy is doing as well as the recent news would indicate.
posted by Bob at 10:06 AM
0 comments
