[2964] Guess the 3Q22 Malaysian GDP growth

It is almost certain the third quarter growth will be massive as far as year-on-year calculations are concerned. Consensus compiled by Bloomberg has it at 12.1%. What do you think the number would be? The official figures will be released this Friday.

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Big as it will be, it will not inform us much about the state of the economy. At least, not by itself alone. So, do not be taken by it and read it with extra context.

It is important to remember what happened a year ago: the third quarter 2021 real GDP dropped by 4.5%, as shown in the chart below (in the same chart, you could see another instance of massive base effect in the second quarter of 2021, responding to the drop the year before).

One simple way to avoid the problem of base effect altogether is to look at quarter-on-quarter growth, and compare it with historical numbers.

For 2015-2019, quarter-on-quarter growth for the third quarter averaged around 3.5% (range: 3.1%-3.9%). Let us ignore 2020 and 2021 due to the usual circumstances those years represent. Since 2022 appears to be a more normal year (as far as normality is concerned, we could probably take the first quarter of this year as the beginning), 2015-2019 appear like a reasonable for casual comparison.

Now, if third quarter growth is indeed 12.1% year-on-year, then quarter-on-quarter growth would be 2.9%.

That 2.9% is below the quarter-on-quarter average of 3.5%, and misses the lower bound of 3.1% (see the second chart above). This also means, if the year-on-year growth figures is to be truly impressive, third quarter growth will have to be significantly higher than 12.1%. Maybe 13% or 14%. Else, it would be either bad, or normal at best.

The quarter-on-quarter growth is something to watch out for, especially at a time when the global economic outlook points toward recession in Europe and the US, along with a weak China. Ignore the year-on-year one for the time being.