2018 Second Quarter GDP and The Missing Growth Syndrome

Proshare

Monday August 27, 2017 07:30PM / Temitope Babalola

 

Introduction: Continued deceleration in momentum

Gross domestic product value at market price at the end of the second quarter of 2018, stood at N30.95 trillion compared to the first quarter which was N28.708 trillion. 

Similarly, gross domestic product at constant price valuation also tilted upwards from N16.24 trillion to N16.718 trillion. 

Real gross domestic product at basic price grew at 1.5% at the end of the second quarter of 2018 compared to 1.95% of the previous quarter, thus reflecting 0.45% deceleration in momentum. 

In a follow up, real gross domestic product at market price slipped from 2.04% in the first quarter of 2018 to 1.46% in the second quarter of 2018    

The implicit price deflator, which is a measure of price movement across sectors, rose from 176.2 at the end of the first quarter of 2018 to 185.15. The upshot in deflator partly captures the drag in both consumption and investment at the end of the second quarter of 2018.   

 

Fig 1:  Deflator 

Proshare Nigeria Pvt. Ltd.

Source: NBS

 

Apart from the manifestation of an ongoing negative output gap, the dynamics depicts continuous deceleration in output in two subsequent quarters.   

Sticking to The Basics

The non-0il sector  grew from  0.76% at  the  end  of the first quarter  of 2018  to 2.45% at the  end of the second quarter of 2018. The oil sector experienced divergence from earlier positive territory, of 14.5% growth to eventually   contract by 3.5%. 

The slack in the oil sector was due to slip in oil production from  2 million barrels  per day at  the end  of the  first  quarter  of 2018  to 1.84 million  barrels  per day   at the end  of the second  quarter.  Therefore, reaching its lowest level  in the last five quarters, thus contributing to the dip in output.

 

Fig 2: Oil Produced Per Day

Proshare Nigeria Pvt. Ltd.

 Source:  NBS

 

The new dynamic forces a rebalancing in favor of the non-oil sector whereby the non-oil sector constitute 91% of the gross domestic product and the oil sector constitutes 8.55% of gross domestic product. 

 

Who Brought What? 

Fig 3:  Sectorial Distribution

Sector

Growth

AGRICULTURE

1.19

MINING AND QUARRYING

-3.84

MANUFACTURING

0.68

  ELECTRICITY

      7.59

  WATER SUPPLY

    11.98

  CONSTRUCTION

      7.66

   TRADE

    (2.14)

  ACCOMMODATION

      2.43

 TRANSPORTATION 

21.76

INFORMATION 

11.81

ARTS

      3.48

 FINANCIAL AND INSURANCE

1.28

  REAL ESTATE

    (3.88)

  PROFESSIONAL

      2.07

  ADMINISTRATIVE 

    (3.41)

  PUBLIC ADMINISTRATION

    (5.21)

  EDUCATION

    (0.67)

HUMAN HEALTH 

      0.41

  OTHER SERVICES

      2.72

Source: NBS

 

The agricultural sector expanded at a relatively subdued pace of 1.19% compared to 3% in the previous quarter of 2018.  The Mining and Quarrying sector contracted by 3.84% largely due to the slip in oil production.  The manufacturing sector grew at 0.68% compared to 3.39% reflecting a deceleration of 2.71%.  

The deceleration was largely due to the slip in both food and beverage sub sector coupled with electrical and electronic subsector.  The utility sector remained positive, namely electricity and water supply grew by 7.59% and 11. 98% at the end of second quarter.  The construction sector grew astronomically from 1.54 in the previous quarter to reach 7.66% at the end of the second quarter of 2018.  Trade and real estate dipped at 2.14% and 3.88% respectively, thereby remaining within the bloodletting position. Accommodation and transportation grew at 2.43% and 21.76% at the end of second quarter. 

The expansion in those sectors were due to seasonal effects. Information and communication grew at 11.81% at the end of the second quarter of 2017, such expansion was on the back of 11.54% growth in the telecommunication subsector. Evidently making it one of the bright spots of   the second quarter of 2018.  

The financial and insurance sector grew at a relatively lower pace of 1.28% at the end of the second quarter, compared to 13.3% expansion in the first quarter of 2018. 

The deceleration was triggered by the slowdown in momentum in the financial  sub-sector from 12.8% in  the first  quarter of 2018 to 0.81% in  the second quarter of  2018.  Two of three sectors considered to be largely to be government dominated, public administration and education   contracted by 5.21% and 0.67% respectively.  

The health care sector expanded by 0.41% compare to a contraction  of  0.37%: apart  from  accelerating  by 0.77%,  the sector  turned  green  for the  first time  after four quarters.  The administrative and supportive sector grew remained within the negative territory as it contracted by 3.41%, evidently making its highest contraction so far. 

 

Conclusion 

 The growth undershoot our projection of 1.82% growth for the second quarter of 2018.  More worrying is that output so far have continued to underbelly both projections of the International monetary fund (IMF) and that of the federal 2% and 3.5.  However, it also underlines deeper lingering negative output gaps, as the nation find itself stuck in a missing growth cycle. 

Even though the macro picture remained ahead of the turning  point,  a large chunk  of  the nation  capacity remained largely  idle. This is as a result of rising supply shocks especially those in the agricultural sector and the vulnerability to export concentration. The present dynamic certainly threatens dents per capital income moving forward and holistically threaten the nation’s net worth.

 
Proshare Nigeria Pvt. Ltd.

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