3Q GDP: Good But Not Great

The headline numbers in last Friday's GDP report show seemingly good progress: -1.2% yoy, compared with a consensus estimate of -2.0%. It's even better than the forecast of 1.7% I did a couple of weeks back:



Looking at the levels, it certainly seems like Malaysia is on pace for a "V" shaped recovery:



Still there are some signs that all is not going smoothly. We have of course the big boost (finally) from excess government spending - not (seasonally adjusted levels and log annualised quarterly changes):




It sure doesn't look like third quarter government expenditure has seen any higher growth than it normally does historically. And export growth is er, iffy while private consumption growth has been sustained - except it's slowed. The upshot of it all is that GDP growth has also slowed, suggesting the recovery is already beginning to lose some steam (log quarterly annualised changes, seasonally adjusted):



To be fair, it was always unlikely for output to fully recover in a couple of quarters. And given the external situation, exports were never going to be of any real support to growth. More positively, the inventory changes number also came in negative, which suggests continuing spare capacity and the potential for a sustained boost in production to rebuild stocks - this recovery still has some legs then.

So this is probably the best to be expected, though I could have wished for better.