Japan's Cabinet Office will publish its preliminary estimate of gross domestic product for July through September at 8:50 a.m. Monday in Tokyo, which is 6:50 p.m. Sunday in Washington. The first reading of a quarter is the one that makes headlines, and it is also the one most likely to change. Reading it well starts with knowing which of its several numbers is being quoted.
Two ways to state one quarter
A GDP release usually gives growth in two forms. The quarter-on-quarter figure is the plain change in output from the previous three months. The annualized figure states what that pace would amount to if it continued for a full year.
The difference is large on paper. In a Reuters poll of 16 economists published Nov. 6, the median forecast for Japan's third quarter was 0.1 percent growth from the prior quarter, which the same poll expressed as 0.3 percent annualized. For the April-June quarter, the government's current figures are 0.4 percent quarter on quarter and 1.4 percent annualized.
Both forms describe the same economy over the same three months. A headline that says "1.4 percent" and another that says "0.4 percent" may be reporting the identical quarter. Because the quarterly number is rounded to one decimal place, multiplying it out by hand will not always reproduce the published annualized rate exactly.
The consensus is a median, not a result
The Reuters figure is a consensus: the middle forecast among the economists surveyed. It is a reference point for judging the release when it comes, not a measurement. When a release is described as a "miss" or a "beat," the comparison is with a number like this one.
First estimates move
Japan publishes a preliminary estimate and then a second estimate. For the third quarter, the second estimate is due Dec. 8, according to the Reuters poll report.
The April-June quarter shows what a revision can look like. It was first reported at 0.3 percent quarter on quarter and 1.1 percent annualized. It now stands at 0.4 percent and 1.4 percent. In annualized terms, that is an upward revision of 0.3 percentage point, the same size as the entire 0.3 percent annualized growth economists expect for the third quarter. The comparison is a useful measure of how provisional a first print is.
The pieces inside the total
The headline is a sum of components, and the poll forecast several of them. Private consumption is expected to shrink 0.2 percent, which would be its first contraction in seven quarters. Capital expenditure is forecast to rise 1.5 percent.
Net external demand, exports minus imports, is stated differently. It is forecast to subtract 0.4 percentage point from growth. That is a contribution to the total, measured in percentage points, rather than a percent change in exports or imports themselves. A component stated as a contribution can be added and subtracted against the headline directly; one stated as a percent change cannot.
Economists at SMBC Nikko described the consumption picture this way: "Service consumption was firm in July-September ... but durable goods consumption contracted due to policy-related factors, while non-durable goods consumption was weak because of the negative impact of rising inflation."
What to look for Monday
A reader of Monday's release can ask four questions in order. Is the number quarterly or annualized? How does it compare with the 0.1 percent and 0.3 percent medians? What did consumption and net external demand contribute? And how was the April-June figure treated, since earlier quarters can be revised in each new release?
A positive reading would mark Japan's fourth straight quarterly increase, according to the poll report. Whatever Monday shows, the Dec. 8 estimate will be the second word on the quarter, not the last.