Japanese economic growth rebounded in the second quarter,allying fears of a bout of renewed economic malaise that had beenfueled by a drop in GDP at the start of the year. The fresh datacorroborate PMI surveys which had already been correctly indicatingthat the economy was faring well.
Reassuringly, the survey data show that the economy continued togrow at the start of the third quarter, albeit with some signs ofmomentum waning due to a sluggish export performance.
Problems with GDP
Accurately predicting Japanese GDP data is extremely difficult,more so than perhaps for any other major economy. Problems arisenot because it's hard to know how the economy's performing, butbecause the initial estimates of the official data are notoriouslyunreliable, being prone to major revisions after initial estimatesare first published.
For example, annual fourth quarter 2017 GDP growth has beenrevised up from a preliminary reading of 0.5% to 2.0%.
The Australian Bureau of Statistics (ABS) has maintained a program of periodic reviews of the Consumer Price Index (CPI) and Selected Living Cost Indexes (SLCIs) every six years, to ensure that they continue to meet community needs. The ABS conducted the most recent of these reviews in December quarter 2017 (ABS, 2017b).
In 2016, as part of the program to enhance the Australian CPI (ABS, 2015b), the ABS investigated the frequency of the CPI and SLCIs expenditure class (EC) weight updates. A feasibility study was conducted using Household Final Consumption Expenditure (HFCE) data from the National Accounts to annually update the CPI EC weights. The findings from this work showed that more frequent weight updates using HFCE data reduces substitution bias in the Australian CPI (ABS, 2016).
Following extensive consultation with key stakeholders, as well as peer review of methods and data sources by Prices and National Accounts experts, the ABS announced stakeholder support for the annual re-weight of the CPI and the intention to implement these new methods and data sources from the December quarter 2018.
The consultation also identified further topics for ABS investigation. These topics included: methods to more frequently re-weight the SLCIs; and providing methodological clarity for the calculation of CPI capital city weights in between the Household Expenditure Survey (HES) years (ABS, 2017a).
The week ahead sees important official data updates to thehealth of the US and Chinese economies at the start of the thirdquarter, as well as UK labour market data and an update to EurozoneGDP. From a policymaking perspective, the spotlight rests inIndonesia, where the central bank meets to set interest rates in aclimate of increasing pressure on emerging market currencies.
This note also includes a special feature this week on China'sbanking sector and the extent to which the recent rise in SMElending poses risks.
Download the article for a full diary of key economicreleases.