August 19, 2018


Bottom line: The economy is continuing to grow rapidly, driven by domestic consumption. However, the data for both Q1 and Q2 were massively distorted by sharp swings in vehicle imports — which soared in Q1 but slumped in Q2. More important is the ongoing decline in investment in residential construction and in new plant and equipment, other than vehicles. Export growth was sluggish, while import growth was strong — the external sector continues to be a drag on growth.


  • Gross Domestic Product (GDP) expanded at an annualised (and seasonally-adjusted) rate of 2.0% in Q2 (April-June) 2018 — a sharp fall from the upwardly-revised 4.8% recorded in Q1.
  • For the first half (H1), the rate of GDP growth was 4.0, similar to the 4.3% posted in H2 2017, but well above the 2.5% of the first half of last year.
  • The business sector (i.e. net of the public sector and NGOs) posted a 4.3% rate of expansion for H1, down from 4.8% in H2 of 2017.
  • Growth continues to be domestically-driven, but investment did not contribute to H1 growth — only consumption, both private and public.
  • Growth in private consumption on a per capita basis swung from 9.6% in Q1 to only 0.5% in Q2. The explanation lies in durable goods purchases — dominated by cars. In Q1 these soared 86% q-o-q (revised down from 95%), before slumping 43% in Q2!!
  • Other private consumption, in current expenditure and semi-durable goods, was positive in both quarters.
  • Government expenditure declined in Q2, by 5.2% after a 12.1% gain in Q1.
  • Residential construction has now declined five successive quarters, but in Q2 investment in plant and equipment also fell (by 5.6%), as vehicle purchases by businesses dropped.
  • Exports were flat (-0.1%) in Q2 (net of diamonds and start-ups, they were down by 4.4%) and managed only 3.3% in the first half.
  • Import growth in Q2 was also negligible — only 1.2% after 19% in Q1. Once again the swings in vehicle imports were responsible.
  • Nevertheless, net of defence imports and ships, aircraft and diamonds, imports rose 8.4% in Q2 — thanks to higher oil prices.

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