Forecast steady for US Q3 GDP growthーNHK WORLD-JAPAN NEWS

Key Concepts

• Business Climate Index
• Gross Domestic Product (GDP)
• Personal Consumption
• Consumer Price Index (CPI)
• Tariffs
• Capital Investment
• Government Shutdown

Economic Outlook for the Week Ahead

This week's economic focus will be on key data releases and their implications for business and economic growth.

Germany's Business Climate Index

• Release: Monday, November
• Context: The release of Germany's business climate index for November is anticipated. The previous month's figures in October showed an improvement, attributed to enhanced expectations.

US GDP Data and the Impact of the Government Shutdown

• Release: Wednesday (anticipated)
• Background: The release of the latest Gross Domestic Product (GDP) data in the US is expected on Wednesday, following the conclusion of a record 43-day government shutdown. The advanced estimate for the July to September quarter was originally scheduled for October 30th but was delayed.
• Previous Quarter's Performance (April-June): Real GDP increased at an annual rate of 3.8% in the April to June quarter compared to the preceding three months.
• Driving Force of Previous Growth: Officials attributed this rise primarily to a decrease in imports.
• Expert Projection for Q3: Nakatskanobuyuki, chief economist at Mitsubishi UFJ Research and Consulting, anticipates that the upcoming data will indicate robust third-quarter growth. He projects a figure of approximately 3%, which he considers "pretty solid."
• Key Drivers of Q3 Growth (Nakatska's View):
  • Personal Consumption: This is identified as the main driving force. High-income earners are spending significantly, benefiting from a surge in stock prices. Their increased financial assets and asset values are boosting their consumption.
  • Disparity in Consumption: Conversely, low-income individuals are facing challenges due to inflation, highlighting a clear disparity in economic impact.
  • Capital Investment: Corporate sector capital investment is also noted as a strong contributor to growth in the third quarter. Companies are investing heavily, despite some caution due to uncertainty posed by tariffs.
  • Demand for Investment: Strong demand exists for investments in areas such as AI, data centers, and intellectual property products like software.

US Inflation and Tariff Impact

• Latest CPI Data (September): The most recent Consumer Price Index (CPI) for September showed a year-on-year increase of 3%.
• Comparison to Fed Target: This figure remains above the Federal Reserve's target of 2%.
• Nakatska's Assessment of Inflation: Despite being above the target, Nakatska views the 3% CPI as "relatively stable," especially considering the anticipated effects of President Trump's tariffs.
• Tariff Cost Absorption: Nakatska explains that the tariff costs were not fully passed on to consumers.
  • Foreign Exporters: Exporters in foreign countries, such as Japanese automakers, absorbed a portion of the tariff costs.
  • US Importers: US importers, like Walmart, also absorbed some of the tariff costs.
  • Consumer Impact: Consequently, only a limited portion of the tariff costs was ultimately passed on to consumers.

Projected Impact of Government Shutdown on Q4 Growth

• Nakatska's Forecast for Q4: Nakatska expects the government shutdown to reduce fourth-quarter growth to approximately 1%.
• Projection for Next Year: He projects that annual growth for the following year will rebound significantly, potentially doubling the Q4 estimate.

Conclusion

The upcoming week's economic data will provide crucial insights into the health of the German and US economies. While the US economy showed resilience in the third quarter, driven by personal consumption and capital investment, the government shutdown is expected to temper fourth-quarter growth. Inflation remains a point of attention, though its impact appears somewhat mitigated by cost absorption strategies. The long-term outlook for US annual growth is projected to be positive.