GDP DATA FOR Q1 2016 — second estimate

June 17, 2016

Bottom line: The second (of three) estimates of GDP growth in Q1 2016 saw an the first estimate — which had shocked the economic and political establishment when it was published last month — revised upwards across the board. The details are examined below, but the key points to note are that the original estimate always looked too bad to be true, that further upward revisions are possible next month — and that the underlying rate of growth is still much higher than even the revised estimate. Expect higher growth in subsequent quarters.

  • Overall GDP — the rate of economic expansion, quarter-on-quarter measured at an annualised rate — was revised up from 0.8% to 1.3%.  But this still implies negative per-capita GDP growth.
  • Business sector GDP was revised up from -0.2% to +0.4%.
  • Private consumption expenditure remains the primary source of growth, with its rate of increase now estimated at 4.8% (rather than 4.0%) — but all of this increase came in spending on non-durable goods.
  • Expenditure on durables fell by 1.5% — but this is hardly surprising after the huge surge (a 56% annualised rate of increase) in Q4 2015! Indeed, the very small drop is still remarkable.
  • Government consumption, was almost unchanged — down by 1.6% instead of 1.7%. This drop stems from reduced defence imports, while domestic government spending rose by 2.6%.
  • The most important good news in the revision related to exports — which provided the worst bad news in the first estimate. Total exports fell ‘only’ 1.1%, compared to the previous estimate of -4.4%. Excluding exports of diamonds and the sale of start-up companies, exports dropped by 8% — still bad, but much better than the 12.9% plunge originally reported.
  • The rise in imports was revised down from 7.5% to only 2.6% and, net of diamonds and defence goods, import growth turned negative, down 3.1%.
  • Thus both components of the external sector contributed to the improvement in GDP growth, although exports’ contribution remains in negative territory.
  • Growth in investments was almost unchanged: overall, the sharp jump in investments was scaled down from 17% to 16%, but the rate of increase in residential construction was nudged slightly higher.
  • The data for Q4 of 2015, which had been revised down last month, were revised up again somewhat — albeit by less than they had been reduced.

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