Some parts of the economy enjoy stable growth rates in normal times. Consumption and government spending are two of the GDP components which grow in a stable manner, unless there is a recession. As much as ridiculous as it may sound (yeah, that is the libertarian in me speaking out), the government does plan its expenditure and that is one of the reasons for smooth government expenditure growth. The same with consumers and others in the private sector too.
Export and import growth rates are stable too, although it is more volatile that the consumption component.
The same cannot be said with investment. It is a stylized fact in macroeconomics that the investment component of the GDP is wildly volatile. It is by far the most volatile of all GDP components. In one period it could reach for the sky and in the next, it could be six feet underground.
Here is a chart to show exactly how volatile investment is compared to other components of the real GDP of Malaysia:
The volatility of GDP investment component (truly, it is gross fixed capital formation) will be mostly true for other countries as well.
So, anybody who wants to score a political point cannot really score a political point if investment in one period slowed drastically. It is the nature of the series. It is just how the economy works.
I write this because the Penang state government has come under criticism because investment into the state has fallen dramatically.[1] Given the context of volatility and investment, I would not take the criticism too seriously.
Now the investment figures referred to are not strictly the real GDP investment component (the one that is of controversy is the approved investment figures), but the nature of volatility is the same anyway.
Slow investment growth may be a worry but only if there is a significant slowdown in the sense that there is structural break. In other words, something like if the average investment growth from 2005 to 2010 is significantly lower than the average from 2001 to 2005. In contrast, if investment growth in 4Q2012 is significantly lower than in 3Q2012, or even if 2012 as a whole is lower than 2011, I do not think one can say much without further context: from the series itself without further context , an investment growth slowdown or even an outright investment slowdown gives out no real story.
