GDP components: industrial growth in good shape, investments lose steam

According to the second estimation, GDP grew by 3.5% in Q1 at a year-on-year basis, a rate minimally higher than the preliminary estimate (3.4%). The quarter-on-quarter growth rate has been also revised upward, from 0.6% to 0.8%.

gdp06_08_ENG_BOn the production side, even if the growth of services accelerated to 2.3% (from 2.1% in Q4), this growth is somewhat below expectations. By contrast, industrial value added rose by 7.7%. As a result, industry remained the main driver of growth, with a record contribution of 1.8 percentage points. As for the smaller conomic sectors, construction value added grew at a respectable rate of 9.2%, while agricultural value added fell by 12%.

On the exenditure side, the dramatic slowdown in fixed capital formation in the fourth quarter was followed by an almost dramatic fall of 6.7% in Q1. Public consumption also decreased, by 5.4%. Similarly to the fourth quarter of 2014, the deterioration in fixed investments was only partially offset by private consumption – the latter grew by 2.6%, a record-high rate since early 2006, but still somewhat less exuberant than expected. As a result, domestic demand grew by a meagre 0.6%, a flop compared to the annual average of 4.3% in 2014. On the other hand, net exports beat expectations again: with imports kept checked by anaemic domestic demand and an outstanding export growth of 10.3%, net exports contributed to GDP growth by a whopping 3% in the first quarter. While investment will probably improve and domestic demand is likely to gather momentum during the coming quarters, with net exports losing some steam accordingly, net exports are clearly back as important drivers of growth, at least for a while.