Tag: GDP

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Economics WDYT

[2822] Guess Malaysia’s 1Q16 GDP growth

I have been slacking off a little bit. My models have not been updated as frequently as it should. Reason is, one fine March day, something wiped the models out. Electrons arranged neatly disintegrated into disorder, destroying the microfoundations (heh!) of my models.

I have backup files, but updating them is a tedious exercise.

So, my projections, especially on quarterly basis might be off for now.

Nonetheless, it does not take much effort to look into the latest data.

And I cannot find much stuff to celebrate.

The full industrial production index for the first quarter is not out yet but for February, production grew only 3.9% YoY. Remember, 2016 is a leap year and in essence, people produced more this year compared to the last just because of the extra day. So normalized growth will be lower than that. At the same time, with all the heatwave going on, I think we also need to discount electricity production spike. It is very likely the electricity generated mostly went into cooling purposes instead of for manufacturing. My electricity bill spiked by about 100% in March. Some of my friends had it worse.

February 2016

I am unsure how much the electricity generation surge is due to mining growth recovery (is it a recovery?) however. I can run a regression model I suppose, but meh. Looking at the lines alone can tell you much about the correlation.

The new core inflation published by the Department of Statistics appears stable, suggesting consumption growth might be stable too. But who knows. With the way economy is going, there might be enough slack that increased economic activities would not affect inflation much. Import expansion for the quarter was uninspiring as well, pointing to the possibility that the economy did not go far enough toward fulfilling its potential. Stable (and low?) inflation and weak import growth mean weak consumption growth.

Export growth is also not convincing by the way.

Government spending growth might be hurting. For most of the first quarter, Brent prices were below $40 per barrel and the government really wanted to cut its deficit still. Things might be better in 2Q16, but not before as far as public expenditure is concerned.

In the end, I think growth might be about the same as the last one. Might be slightly slower too for all I know. In 4Q15, the Malaysian RGDP grew 4.5% YoY.

Maybe you know better?

The Department of Statistics will release Malaysia’s GDP figures on Friday, May 13.

How fast do you think did the Malaysian economy grow in 1Q16 from a year ago?

  • 3.0% or slower (8%, 1 Votes)
  • 3.1%-3.5% (8%, 1 Votes)
  • 3.6%-4.0% (23%, 3 Votes)
  • 4.1%-4.5% (54%, 7 Votes)
  • 4.6%-5.0% (8%, 1 Votes)
  • 5.1%-5.5% (0%, 0 Votes)
  • Faster than 5.5% (0%, 0 Votes)

Total Voters: 13

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Categories
Economics

[2815] A hint of consumption recovery in the 4Q15 GDP

The 4Q15 GDP figures came out better than my expectation. I had projected about 4.3% YoY but the official figure came slightly higher at 4.5% YoY. However, it is still an overall slowdown as warned earlier.

GDP 2015Q4

But there is a good news here.

The blue line in the chart above representing consumption growth picked up. That is a green shoot, a hint that the economy might be turning around. Consumption weakness has been the number one reason behind the gradual slowdown we are seeing in the economy. This is why the slight uptick is an important point to note.

I do not have much details behind the stronger (but still weak!) consumption growth yet, but on the production side, there is a reason to be optimistic that this is not some no-good dead cat bouncing around. Based on the performance of the retail sector, consumers did buy more stuff:

GDP 2015Q4 production

There is also good news for people working in finance. The fourth quarter was less bad than 3Q15. The only real bad news is for people in mining. I am unsure if the drop it is all about base effect, but the situation in the oil and gas sector is not pretty regardless. I suppose QoQ readings would tell me more but I am in a hurry right now.

GDP 2015Q4 mining production

We are not out of the woods yet. Despite signs of a turnaround, the 4.5% YoY overall growth is still a slowdown. Consumption has to cover a lot of ground before we can claim to be out of the $700 million MYR2.6 billion hole. And I am worried about the employment rate given so many layoffs taking place late last year. The effects of those retrenchments might come too late to be accounted for in the 4Q15 GDP data.

Finally, for the lovers of headline figures, the curse of 1Q15 frontloading will bite back this quarter. Nevertheless, that will only be a mathematical quirk.

Categories
Economics WDYT

[2814] Guess the 4Q15 GDP growth rate

The Department of Statistics will release the GDP figures for the last quarter of 2015 tomorrow.

I fear we will see the ugliest numbers within the past three years, if we are lucky. It will not be a contraction but for a country like Malaysia — a young population which suggests strong potential growth — anything close to 4% YoY is pretty bad. In 1Q13, the GDP grew 4.3% YoY. To find something worse, you will have to go all the way back to 2009 during the last recession.

I think private consumption growth decelerated in the last quarter. In 3Q15, it expanded only 4.1% YoY after increasing 6.4% YoY. If I have to guess, the GST is having a prolonged negative impact on the economy, on top of other things happening. The various layoffs we saw last year added further stress to consumption growth. These people who lost their jobs should begin to cut their spending. I have also heard discouraging stories over the Chinese New Year, suggesting it is not over yet, which made me re-read a joke I wrote three years ago that is no longer funny. I have also noticed many oil and gas professionals are turning to Uber to meet their financial obligations.

At work as well, we maintain various index measuring all kinds of things from sentiment to spending pattern. I cannot share them with you but I can tell you, it ain’t pretty.

But perhaps, the surest indication of a slower economy beyond anecdotes is from the manufacturing side. The GDP does follow industrial growth rather closely. So closely in fact, you could make a decent econometric forecast based on the index. The following chart comparing GDP with industrial growth gives you an idea of what had happened in the quarter.

Source: Department of Statistics Malaysia

Another piece of bad news is the government is in love with its deficit target out of fear of credit rating downgrade. I generally supportive of cutting the deficit but this is the wrong time to do it. But, I am just a keyboard warrior.

Exports however might cushion the domestic slowdown. In the fourth quarter, I think, it finally exhibited a J-curve, which essentially describes the idea that exports would slow rise up after a currency depreciation. Indeed, exports to the US have been phenomenal for a number of months now. Overall exports of goods have grown faster in 4Q15 on yearly terms compared to the previous quarter. But it will not be enough to fight off the domestic growth slowdown.

At the end of the day, this keyboard warrior’s model suggests the 4Q15 GDP growth will be around 4.2%-4.4% YoY.

But I could be wrong. Could you do better?

This not-nearly-as-scientific poll will close at noon tomorrow when the official GDP figures are out.

How fast did the Malaysian economy grow in 4Q15 from a year ago?

  • 2% or slower (0%, 0 Votes)
  • 2.1%-3.0% (0%, 0 Votes)
  • 3.1%-3.5% (0%, 0 Votes)
  • 3.6%-4.0% (36%, 4 Votes)
  • 4.1%-4.5% (36%, 4 Votes)
  • 4.6%-5.0% (27%, 3 Votes)
  • Faster than 5.0% (0%, 0 Votes)

Total Voters: 11

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Oh, this post is dedicated to this man.

Categories
Economics WDYT

[2805] Guess the Malaysian 3Q15 GDP growth

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.

 

Categories
Economics

[2791] Frontloanding theory confirmed for 2Q15 GDP

Apart from the slowdown in consumption, I was wrong. The Malaysian GDP grew 4.9% from a year ago, considerably higher than what I thought it would be at 4.1%-4.2% YoY. Still, economic growth is decelerating quite drastically.

Malaysian GDP growth

Trade surplus did not improve as exports contracted worse than imports, and not the other way round as I wrote previously. Service trade and price factors have something to do with it since trade values published monthly had suggested otherwise. I had naively taken the number without taking into account export and import prices.

Meanwhile, investment growth crashed, becoming much weaker than what I expected. The Pengerang project has not created much dent yet.

But the two big things that caused me to miss the actual growth figure are inventories and government spending. I should have raised my inventory projection when the industrial figures come out respectably okay but the pessimistic me refused to do so. And I had expected with all the rage for deficit targeting, government expenditure would have taken a big hit (yes, I know the GDP government spending does not correspond exactly to actual federal government spending and there are other states’ government spending to account for). It grew in annual terms instead.

The thing that was really hard to get it wrong was consumption. The GST collected its toll. It was a stark slowdown, growing only 6.7% YoY after the 1Q15 8.8% YoY spike. Domestic demand growth decelerated to 4.6% YoY from 7.9% YoY in the same period.

A lot of people had expected a dip after the spike and they were right. The frontloading theory is right.

That has led me thinking about how much did consumers stock up on their foodstuff and other typical consumer non-durable goods. None of us has a warehouse to store a whole year worth of supplies.

This is a hard and important question. Whatever the answer is, it is the key to knowing when will spending normalization take place. When it happens, I think it is reasonable to expect a massive spike in consumption, at least on quarter-on-quarter basis.

If I had to guess, the normalization would probably start this quarter. We could see complete normalization by the end of the year.

Still, preempting the typical data for 3Q15, this quarter would likely be weak too and I feel we would only start getting better in 4Q15. The GST impact itself should be gone completely by 2Q16, if only because of mathematical artifact.