JAPAN DATA: Q3 GDP Contracts, But Resilient Detail, Particularly Business Spend
Nov-17 00:21
Q3 GDP (preliminary) in Japan was negative q/q, but not as much as the market forecast, thanks to upbeat business spending (+1.0%q/q versus -0.1% forecast). This was the first GDP decline since Q1 2024, but the detail paints a resilient underlying economic backdrop and comes ahead of fresh fiscal stimulus from the new Takaichi government. Today's GDP data should add some confidence, at the margins, the BOJ has in the GDP backdrop (particularly in terms of the drivers). We await Ueda's early Dec speech for details around hike timing.
- The q/q outcome for GDP was -0.4% against a -0.6% forecast. Note Q2 growth was revised to +0.6% from 0.5% originally reported. In annualized terms, growth -1.8%q/q, versus -2.4% forecast and a revised 2.3% gain in Q2. Note business s[ending was also revised up in Q2 to 0.8% from 0.6%q/q. Other components of GDP were close to forecasts, consumption up 0.1%q/q, while inventories were a -0.2ppt drag and net exports also trimmed -0.2ppt off growth.
- Whilst this is just a preliminary GDP print, the detail should be welcomed by the authorities. The q/q trends for private consumption (the white line) and business spending are plotted in the chart below.
- The resilience to strength in business spending, in particular, will be welcome. Via our Tokyo policy team: Private consumption and capital investment, the major components of the economy, are likely to firm in or after the fourth quarter, the official said. Private consumption, particularly non-durable goods, was hit by high prices and scorching weather in Q3, but is undergoing a moderate recovery supported by improving consumer sentiment, the official added.
- This also comes ahead of fresh fiscal stimulus, via BBG: "The Finance Ministry plans an economic package worth about ¥17 trillion ($110 billion), the Nikkei reported on Saturday, without identifying its sources. The supplementary budget to fund the spending is expected to reach about ¥14 trillion, exceeding last year’s ¥13.9 trillion compiled under former Prime Minister Shigeru Ishiba, the report said." - BBG
Fig 1: Japan GDP Components, Q/Q (Consumption (White Line) & Business Spending (Orange Line)
Source: Bloomberg Finance L.P./MNI
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LOOK AHEAD: US Week Ahead Headlined By Delayed CPI Report On Friday
Oct-17 20:51
- The September US CPI report will be released on Friday, delayed amidst the government shutdown but with the BLS making a special exception on social security payment considerations.
- Bloomberg consensus looks for headline CPI inflation at a rounded 0.4% M/M after 0.38% back in August and for Y/Y inflation to firm two tenths to 3.1% for what would be its highest since May 2024.
- Core inflation is seen at a rounded 0.3% M/M after 0.35% in August (exceeding the median unrounded estimate of 0.31%) and 0.32% in July. It’s expected to see core CPI inflation hold at 3.1% Y/Y having in August increased to its highest since February.
- Core details should see focus on both goods and services angles: underlying goods inflation has clearly firmed in recent months on tariff pressures although the median increase has currently seen a peak back in June, whilst services will be watched for any spillover after some strong recent non-housing readings.
- The report will come within the FOMC blackout period ahead of the Oct 28-29 decision, with a 25bp cut fully priced and likely needing a large surprise to alter this.
- As for broader inflation details, Fed Chair Powell this week confusingly suggested that we will have the September PPI report but the BLS had previously said “No other releases will be rescheduled or produced until the resumption of regular government services”.
US DATA: Latest Jobless Claims Estimates During The Shutdown
Oct-17 20:30
As noted earlier, MNI estimates initial jobless claims at a seasonally adjusted 218k in the week to Oct 11 and continuing claims at a seasonally adjusted 1929k in the week to Oct 4.
- To give a better idea of sensitivity around these estimates, which rely on estimates for some missing states, we note the below analyst estimates:
- Goldman Sachs have a central estimate of 217k for initial claims in a range of 211-225k, whilst they see continuing claims at 1917k in a range of 1885-1930k.
- JPMorgan meanwhile also see 217k for initial claims whilst they see continuing claims as having held constant at 1927k.
NATGAS: Venture Global in Talks with Ukraine for more LNG Deliveries, Reuters
Oct-17 20:28
Ukraine is seeking more cargoes from Venture’s Plaquemines facility as the embattled nation approaches the winter heating season, according to Reuters sources
- Venture is in talks with Ukraine’s DTEK to procure more LNG cargoes after a year of gas infrastructure attacks by the Russians.
- Venture Global CEO Michael Sabel met with President Volodymyr Zelenskiy on Thursday October 16.
- DTEK signed an agreement in 2024 for an undisclosed amount of LNG from the facility, as well as 2 mtpa from Calcasieu Pass Phase 2 currently under construction.
- Plaquemines currently has spare capacity to deliver more cargoes to Ukraine on the spot market, per Reuters.
- Plaquemines now sends out the second highest LNG volume in the US, with feedgas demand averaging 3.45 bcf/d according to MNI figures.
