Private demand expanded 0.7 percent in the second quarter (vs 0.3 percent in Q1), as household consumption grew by the most in two years (0.6 percent vs 0.1 percent) on the back of demand for cars and air conditioners. Also, capital expenditure rose sharply (1.5 percent vs 0.4 percent), far above forecasts of a 0.7 percent rise. Construction of hotels and leisure facilities led the gains, boosted by a steady stream of inbound tourists and an expected surge in demand ahead of the 2020 Tokyo Olympic Games.
In addition, public demand growth accelerated significantly (0.9 percent vs 0.2 percent), with government spending rebounding strongly (0.9 percent vs -0.1 percent) and public investment advancing further (1 percent vs 1.4 percent).
Meanwhile, external demand subtracted 0.3 percentage point to GDP growth. Exports of goods and services dropped 0.1 percent (vs -2 percent in Q1), while imports rose 1.6 percent (vs -4.3 percent in Q1).
On an annualized basis, the economy grew by 1.8 percent in the second quarter, after an upwardly revised 2.8 percent expansion in the March quarter and far above estimates of a 0.4 percent advance.