Capital Economics says that Japan's economy likely slowed in Q1

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  • The plunge in industrial production in February all but reversed the surge in January
  • The upshot is that Japan's economy seems to have slowed in the first quarter of this year.
  • The 3.4% m/m fall in industrial production in February was much larger than the Bloomberg median of a 1.9% m/m drop and our own forecast of a 0.5% m/m decline
  • Firms predict another 2.0% m/m decline in output in March, though they expect a 3.6% m/m rise in April
  • These forecasts tend to overestimate the future level of output, so the actual results may be even weaker
  • In line with last week's disappointing data on consumer spending, today's figures thus confirm that the economy slowed in the first quarter of 2015. We stick to our forecast that Japan's GDP will be flat this year rather than expand by 1% as expected by the consensus