Markit Economics Research

16/02/2009

Japan GDP
Japan’s economy shrank at the fastest pace in over three decades in Q4

PMI signals deepening recession heading

§ Q4 GDP contracted by 3.3% on a
into 2009
quarterly basis.
The grim GDP figures highlight the severity of Japan’s
recession. Moreover, PMI data indicated that the pace of
§ The PMI anticipated the extent of the
contraction remained considerable in January,
downturn in Japan’s GDP. suggesting that it is highly likely that Japan’s economy
will continue to shrink at a considerable pace during the
Sharp drop in Q4 GDP signposted by the first quarter of 2009.
PMI survey
Chart 1: Quarterly GDP growth
Official data released on 16 February by Japan’s
Cabinet Office indicated that Q4 GDP dropped by 3.3% Quarterly % change sa, 50 = no change
from the third quarter, and 12.7% on an annualised 60

basis. The latter figure was worse than the median 1.0

forecast of an 11.7% annualised GDP fall in a poll

50
conducted by Reuter’s. The double-digit contraction -0.5
marked the third successive quarterly shrinkage of the GDP PMI

Japanese economy, and was the steepest fall since a

40
13.1% annualised drop in the January – March quarter -2.0

of 1974.
The Nomura/JMMA Japan Manufacturing PMI, compiled -3.5 30
2002 2003 2004 2005 2006 2007 2008 2009
by Markit and released on a monthly basis, correctly
predicted the sharp Q4 contraction. October’s PMI Chart 2: Japan Manufacturing & Services PMI
recorded a level below the neutral threshold of 50.0 for
PMI Output/Business Activity Index
the eighth successive month, while PMI data for 60.0

November and December signalled that operating

conditions deteriorated at unprecedented rates. The PMI 50.0

has tracked the underlying trend in Japanese GDP since

40.0
its inception in October 2001, whilst also providing a less
volatile measure of economic growth compared to 30.0
Manufacturing
official GDP figures (see chart 1).
Services
20.0
Chart 2 illustrates the relative performance of Japan’s
manufacturing and services sectors. PMI data indicate 10.0
J F M A M J J A S O N D J F M A M J J A S O N D J
that the manufacturing sector led the sharp downturn in
2007 2008 2009
Q4 GDP, primarily reflecting a collapse in export
demand – official data signalled that exports plunged
The Japan Manufacturing PMI is released on the 26
35% year-on-year in December – and steep a reduction
February, followed by the Japan Ser vices PMI on the 3
in industrial production. Meanwhile, service sector
March. To find out how to receive data from the surveys
business activity also fell at a sharp pace, but newly
or obtain copies of the reports, please contact
released PMI data suggested that the rate of decline
economics@markit.com
was slower than in manufacturing.
Chris Williamson Alex Hamilton
Chief Economist Economist
Markit Markit
Tel: +44 20 7260 2329 Tel: +44 1491 418 676
Email: chris.williamson@markit.com Email: alex.hamilton@markit.com
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