The upwardly-revised Q1 GDP data have set a solid base for the year. We expect growth of around 2.6% in 2007 as a whole, comfortably above the latest consensus of 2.2%. The slump in the index of leading indicators is a concern, but there is no such evidence of an imminent recession in the latest surveys of consumer confidence or business conditions. In the meantime the labour market has tightened further. The Q2 Tankan survey (released on 2nd July) should confirm that the economic expansion is continuing, albeit at a slightly slower pace than in the previous two quarters.
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