Q3 GDP: vigorous growth in fixed capital formation

131204_GDP_contribution_final useAccording to the final data, GDP grew by 1.8% against the same quarter of 2012, and by 0.9% compared to the previous quarter, as opposed the 1.7% and 0.8% preliminary figures, respectively. Due to this upward correction, the growth outlook slightly improved: now an annual growth rate of somewhat above 1% is likely in 2013 as a whole.

As for the components of GDP: Unlike in the second quarter, net exports contributed positively to GDP growth, with the growth rate of export (131204_GDP_contribution_production6%) slightly exceeding that of import (5.8%), which is definitely good news. But the contribution of net exports may turn to the negative after an acceleration of the growth rate of domestic use. In the third quarter, the volume of domestic use grew by as little as 1.2%, primarily due to stagnating private consumption. On the other hand, the growth of gross capital formation accelerated to 8.2% in the third quarter, primarily (but not exclusively) due to a jump in manufacturing investments.

On the production side, agriculture and, less prominently, construction retained their role as the drivers of economic growth. As for the former, the CSO revised the Q2 year-on-year growth rate upwards – as a result, the cumulative growth rate in Q1-Q3 exceeded 20%. The cumulative growth rate in construction hit 5.6%. On the other hand, industrial value added grew by only 0.4% in the third quarter, as opposed to the 3.3% growth in the volume of gross industrial production. Due to this widening of the negative gap between the growth rates of gross output and value added, industry is unlikely to contribute to economic growth in any substantial way this year.   The value added of services grew by a minimal 0.1% in the third quarter, resulting in a cumulative growth rate of -0.1% for Q1-Q3. (This is because the CSO revised the year-on-year services growth rate for the second quarter downward, into negative territory).