Thursday, May 19, 2011

1Q 2011 GDP: Disappointing

I admit I expected better. So did the consensus opinion, which was looking at between 4.7%-5.0%. But we’re still looking at a somewhat respectable 4.6% GDP growth for 1Q 2011 (log annual changes; seasonally adjusted log quarterly changes, annualised; 2000=100):


The SAAR figure is an even more respectable 7.0%, which compares well with growth throughout most of the past decade.

Despite all the efforts of PEMANDU and the slew of investment announcements these last six months, what brought the GDP figure down was investment, of all things (seasonally adjusted log quarterly changes, annualised; 2000=100):


To be fair, most of the announced ETP projects probably won’t take off until the second half of the year, so its really premature to talk about problems with the ETP just yet.

Note also the unseasonally big growth in government spending. I’m not going to read too much into this until the 1Q 2011 government budget figures are released later this month, but this appears to mark another switch in the government’s fiscal strategy. The government has been fiscally cautious in the post-crisis era, and this may be a signal that the government is prepared to spend again. Preparing the ground for a general election? Your guess is as good as mine.

On the supply side, every sector registered growth, except for construction (seasonally adjusted log quarterly changes, annualised; 2000=100):


Mining growth was a surprise, and agriculture zoomed, but services growth is disappointing – mainly a function of the fact that services output never really faltered at all during the recession and hence wasn’t boosted by a “recovery” growth dividend either (seasonally adjusted; 2000=100):


One last item before I leave this topic: the GDP deflator is implying an inflation rate that’s closer to 4.0% – compare that with the current CPI-based inflation rate:


The big difference is that the GDP deflator includes both export and import prices, so there’s an element of pricing that consumers never experience. Nevertheless its often useful to be aware of what the deflator is doing.

Technical Notes:

1Q 2011 National Product and Expenditure Accounts from the Department of Statistics

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