Growth in 2Q15 was bad but we know it due to the GST with all the front-loading spending.

The question now is, was the GST largely the one exerting negative pressure on growth?

In a very superficial way, growth should rebound in 3Q15 if the answer to the question is in the affirmative because it suggests consumption would return to normal.

If not, we should see worse growth in the last quarter, and possibly bigger trouble ahead.

Things are quite confusing for me at the moment because of the GST as well as due to low energy prices. Inflation has stopped being a useful proxy to demand and is out of wack. It is driven by cost factor and not really demand. I have not figured out how to handle this yet but things might only stabilize April next year, assuming energy prices remain at about current levels.

There are signs something bigger than GST is at work. The service sector is not doing too well. We know this from official 3Q15 statistics. Service growth was mostly pulled down by the finance sector, but retail growth also moderated. I am also hearing many anecdotes of personal hardship with greater frequency than usual. Some of my friends run businesses and they are not doing great either. I usually would dismiss anecdotes but I dare not do it this time around. There are just too many of them.

But there are good news. Industrial production did well, and so did construction and exports.

Net exports should give a big boost to the GDP, cushioning any expected slowdown in the domestic economy. I do not know how long the export strength will last, but for 3Q15, it looks like we had the two engine-model back. The weak ringgit might have a contributing factor, but I think it is a bit too soon to pass judgment about currency and competitiveness despite the temptation to claim so.

But, yea, the only reason I write this post is to do this poll:

How fast did the Malaysian economy grow in 3Q15 from a year ago?

  • 3.0% or slower (17%, 2 Votes)
  • 3.1%-4.0% (8%, 1 Votes)
  • 4.1%-4.5% (42%, 5 Votes)
  • 4.6%-5.0% (33%, 4 Votes)
  • 5.1%-5.5% (0%, 0 Votes)
  • Faster than 5.5% (0%, 0 Votes)

Total Voters: 12

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The official GDP figures will be released midday tomorrow.


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