Friday, November 22, 2013

3Q2013 National Accounts

Well, it’s a week late, but better late than never.

GDP growth in 3Q2013 rose 5% on the year (log annual changes; 2005=100):


It’s not quite back up to the growth rates seen in 2011-2012, but its getting there. The biggest change was in net trade, which posted the first positive contribution to GDP growth in two years, even if it was a middling 0.1 percentage points. Contrast that with the negative 3.3 percentage points in the previous quarter. Private consumption and investment were both fairly robust, offsetting lower public demand.

On the supply side, there were growth upturns in all but mining (log annual changes; 2005=100):


About two-thirds of growth came from services, with another 20% or so from manufacturing. In services, apart from government, the biggest growth contributions were from retail trade, real estate and business services, communications and wholesale trade which collectively provided half the growth impetus – the property market and plain consumption appear to be the driving forces here. In manufacturing, about 3/4ths of growth was driven by petroleum products and transport equipment.

The seasonally adjusted quarter on quarter view suggests growth momentum is back to trend (log annual changes; seasonally adjusted and annualised log quarterly changes; 2005=100):


Note that 1Q2013 quarterly GDP growth was negative, and 2Q and 3Q growth were both actually pretty strong.

For my peace of mind, this next chart is what matters most (log annual changes; seasonally adjusted and annualised log quarterly changes):


Nominal income growth is coming back up – quarterly annualised growth hit almost 12% in log terms. The key difference comes from this (log annual changes):


I thought growth in the GDP deflator might turn slightly positive for 3Q2013. As it turns out, it didn’t quite make it, but it was a close run thing. Global crude oil prices are a little above the level they were a year ago, while CPO prices were a little below. Natural gas prices were down, but there was relative stability in other commodity prices. In short, the decline in nominal income growth from falling commodity prices has been halted at least for the nonce, which combined with higher production means at least some growth in terms of actual money in people’s wallets.

Just to underscore this point, GNI per capita posted the first increase since 4Q2012 (RM):


So, will all this continue? I certainly hope so, and the numbers coming out of Malaysia’s export markets certainly are a bit more cheery than the situation six months ago. The global economy is not out of the woods yet, and we’ve yet to see what kind of impact the withdrawal of monetary stimulus will have down the road (hint: I don’t think it will be as bad as the markets seem to think).

On a more technical note, my latest GDP forecast underpredicted realisation by 0.3%, which isn’t too bad – that would put the forecast error at about 0.5 standard deviations from the point forecast, and makes it my most accurate forecast in over a year. After a year of some pretty large deviations, I’m looking forward to more normality, and hopefully a bit more predictability in the economy.

Technical Notes:

3Q2013 National Accounts report from the Department of Statistics

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