- December quarter data saw the Japanese economy grow +2.2% (qoq annualised) following two consecutive quarters of contraction. So the economy is out of recession although the result came in weaker than expected. The consensus market expectation was for growth of +3.7%.
- As expected there were positive contributions from net exports and consumption while capital expenditure was positive for the first time since the first quarter of 2014. That said, growth in all three components was weaker than expected.
- We expect continued modest growth in the period ahead. While it was great to see growth in capital expenditure we expect this will remain subdued. At the same time consumption will get a boost from lower oil prices and exports are expected to continue to expand on the back of the weaker Yen and stronger growth in the US.
- This result along with the Euro zone data released over the weekend (see post below) supports our expectation of continued divergent growth in the key developed economies in 2015 with the US and the UK expected to growth around 3.0-3.5% while Japan and the Euro zone are expected to remain in second gear at around 1.0-1.5%.