August 31, 2014

GDP growth picks up pace in 2Q14

Government yesterday announced GDP growth of 6.4% in 2Q14, accelerating from the downscaled 5.6% growth in 1Q14 but slower than the 7.9% growth in 2Q13. Overall growth was fueled by the rebound in agriculture (+3.6% from +0.9% in 1Q14) and industry (+7.8% from +5.3% in 1Q14) that helped cushion the slowdown in services (+6% from +6.8% in 1Q14). Industry growth was buoyed by the 10.8% growth in the manufacturing sector which in turn was driven by the 10.7% rise in food manufactures. Construction decelerated to 1.4% due to a contraction in public construction that weighed on the robust growth in private construction.

On the expenditures, robust growth in household consumption (+5.3% in 2Q14) helped compensate for the flat government consumption. Meanwhile, investments in fixed capital formation contracted by 2.4% after growing by 9.5%in 1Q14 and 33.6% in 2Q13 as growth in investments in breeding stock and orchard development remained negative while overall construction investments growth decelerated to 4% in 2Q14 from 11% in 1Q14 and 16.5% in 2Q13. Again, the latter was due to a 12.9% contraction in public construction even as private construction growth was relatively sustained at 12.8%.

Our take: Growth slightly surprised the market with the average consensus forecast at 6.1%. At any rate, the rebound in 2Q14 brought the overall 1H14 growth at 6%. Barring any destructive calamities, further negative impact of limited movement of cargoes from the ports, and assuming that government can accelerate spending in 1H14, the 6.5%-7.5% full-year growth target of the government may likely be achieved. – WealthSec