November 20TH , 2019


Bottom line: Much of what is happening in the economy is not good, in some cases plain bad. But the underlying trends are distorted in the quarterly GDP data by huge volatility from one quarter to the next, caused by swings in vehicle imports. Looking beyond this “noise”, it becomes clear that growth is driven only by private consumption – which is weakening – and government spending. Exports and investment are both negative factors, and even the sluggish growth of imports is bad news. In short – and despite the seemingly strong ‘headline number’ – there are increasing grounds for concern.

  • Gross Domestic Product (GDP) expanded at an annualised (and seasonally-adjusted) rate of 4.1% in Q3 (July-September) 2019. This is a sharp rebound from the 0.8% rate in Q2 and similar to the 4.5% rise recorded in Q1.
  • The business sector (i.e. total GDP net of the public sector and NGOs) posted a 5.0% rate of expansion for Q3, after 0.3% in Q2 and 5.6% in Q1.
  • Growth continues to be driven by consumption, both private (+2.8%) and government (+4.2%). However, growth in private consumption growth has become very narrowly-based: Per capita spending on current expenditure was flat, that on semi-durable goods fell (-9.7%) and only spending on durable goods rose sharply (+31.8%).
  • The rise in durable goods spending was almost entirely focused on cars, rather than appliances etc. The massive swings in vehicle purchases in recent quarters – up in the first, down in the second and up again in the third – are behind the volatility in private consumption and this feeds through into the rate of overall GDP growth.
  • Other than consumption, GDP was negative, with the weakness seen in Q2 intensifying in the latest quarter.
  • Investment in plant and equipment fell 9%, for the second successive quarter. Investment in R&D was one of the few bright spots in the latest set of data.
  • Non-residential construction was also down and even residential construction was only marginally positive.
  • Exports posted a decline of 8.4%, with the slackening growth in exports of services unable to offset the sharp decline in goods exports.
  • Imports posted a 1.9% gain – also thanks to the surge in vehicle purchases, while imports of most consumer and investment goods were weak.

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