GDP components: decelerating private consumption, deteriorating net exports

3/12/2014

The second estimation of Q3 GDP confirmed the deceleration of GDP growth to 3.2% year-on-year (and to 0.5% compared to the previous quarter) in the third quarter of 2014. The deceleration is reflected in most components of GDP. On the production side, the pace of expansion slowed down in industry and especially in construction, as expected, but also services growth decelerated. In fact, the growth contribution of services decreased the most palpably in Q3. Agricultural growth, on the other hand, accelerated above 10%, an altogether unexpected development.

As for the expenditure side, it is worth noting that the overall growth rate of domestic demand even accelerated above 5%, despite the softening of growth in both private consumption and fixed capital formation, due to the explosion in the change in inventories, and, as a result, an acceleration in overall gross capital formation. On the other hand, the negative gap between the growth rates of exports and imports widened to 3.1 percentage points, the highest since 2003, resulting in a massive negative growth contribution of net exports in the third quarter. In light of the new data, net exports may well contribute negatively to GDP growth in 2014 as a whole.