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Sunday, August 16, 2009

Japan's Odd Q2 Positive GDP Print

Bloomberg details:

Japan’s economy grew for the first time in five quarters as a revival in exports and consumer spending helped the country climb out of its worst postwar recession.

Gross domestic product expanded at an annual 3.7 percent pace in the three months ended June 30, following an 11.7 percent decline in the previous quarter, the Cabinet Office said today in Tokyo. The median estimate of 22 analysts surveyed by Bloomberg News was for 3.9 percent growth.

The recovery may not be sustained once the $2 trillion in worldwide stimulus that propped up sales for exporters from Toyota Motor Corp. to Kubota Corp. runs out. Some 40 percent of factories still sit idle, forcing companies to cut costs and leaving the winner of an Aug. 30 election with the challenge of staving off unemployment that’s approaching a record high.
What wasn't mentioned is that GDP actually shrunk in nominal terms (i.e. more was produced, but sold for less).

This has happened before (but real GDP has never been higher, while nominal GDP was negative).

QoQ Nominal vs. Real GDP

My question... how strong is end-user demand really if the price deflator increase GDP a full 1% quarter over quarter?

Source: ESRI