GDP DATA FOR Q1 2016 — first estimate

May 17, 2016

Bottom line: The first estimate for GDP in the January-March quarter was a surprisingly — many would say shockingly — low 0.8% on an annualised basis, which is perilously close to zero and represents a negative rate of per capita growth. However, the details are less grim than the headline figure and strongly suggest that growth will recover in the course of the year.

• Business sector GDP was a negative -0.2% (all changes are seasonally adjusted and at annualised rate).
• The main source of growth was private consumption, which posted a 4% rise — all from spending in non-durables, whilst expenditure on durable goods collapsed from a 56% (!) annual rate of increase in October-December to zero in January-March.
• Government consumption, on the other hand, fell by 1.7%, although that was caused by lower defence spending. Net of defence imports, government spending was up 2.5%.
• The weakness was centered on exports which were down 4.4% overall — but excluding diamonds and sales of start-up companies, exports slumped at a 12.9% annual pace.
• The previously-reported rise in exports in October-December, of 3.3%, has been revised down to only 1%.
• The negative contribution of the external sector was amplified by a 7.5% increase in imports.
• The other positive source of growth was investments, which jumped 17%, an even faster pace than the 13% recorded in the previous quarter. Significantly, residential construction posted a 9% rise, almost double the pace of Q4.
• The latest data also include a downward revision of growth in Q4 of 2015, from 3.8% to 3.1%, due mainly to weaker exports. But this was offset by upward revisions to the earlier quarters of 2015, so that growth for the full year was unchanged at 2.5%.