Monthly GDP declined 0.4% in September, the first decline since January 2014, when unseasonably harsh winter weather hampered aggregate production. The decline in September was mainly accounted for by declines in net exports and PCE. There were smaller and more or less offsetting changes in other components. The level of monthly GDP in September was 0.7% below the third-quarter average at an annual rate, implying weak statistical momentum heading into the fourth quarter. Our latest forecast of 2.1% GDP growth in the fourth quarter assumes increases in monthly GDP over the three months of the fourth quarter that average 0.3% per month. Click here for more information on MA’s Monthly GDP measure.
This commentary follows very closely the piece we wrote on April 2, 2013, “Exit Shirakawa, Enter Kuroda: How Will It Matter?” The BOJ on Friday announced an expansion and strengthening of its asset purchase program. Given that we interpret QQE, introduced in April 2013, as an open-ended program, we interpret Friday’s actions as further asset purchases under QQE. The expanded purchases are consistent with the BOJ following a reaction function as other central banks do. Central banks adjust their policy instruments in response to unexpected data and changes in their forecasts so that their policies remain consistent with reaching their objectives. Inflation had fallen to just above 1%, and 2015 is around the corner. There was little prospect that inflation would rise to 2% in 2015, as the BOJ had projected. It was time to adjust policy. Governor Kuroda, in our view, emphasized “2% in two years” when QQE … Continue Reading