Picking sectors, and sometimes stocks


Wednesday, November 19, 2014 10:03 AM / FBN Capital Research


From the national accounts for Q3 2014 we have identified the five fastest growing sectors. We have limited our scope to what the NBS terms activity sectors, which are often subdivided into segments, and only those accounting for at least 1% of GDP at constant market prices.


Our first point is that growth in each case other than information and communications was slower than in Q3 2013. This is not a surprise since non-oil growth slowed to 7.3% y/y from 8.5%.



Investors in NSE stocks may read across from the sectoral growth data to listed companies. In the case of manufacturing, they may struggle to reconcile 16.0% y/y growth in Q3 with the poor results in recent reporting seasons.


Our estimates suggest that the combined output of listed manufacturers represents about 4% of the sector’s GDP. It is also significant that the growth of the larger segments in Q3 ranged from 6.5% y/y for food, beverages and tobacco to 28.1% for cement, and 30.2% for textiles, apparel and footwear.


Unlisted small companies were presumably responsible for the 16.0% y/y growth, being generally outside the tax net and not burdened by regulatory costs. They do not bear the expense of nationwide distribution networks, and tend to cater for the low-income consumer.



The presence of education may come as a surprise, given the substantial government weighting in the sector. However, we recall that education alone provided 34.3% of new jobs created in H1 2014 according to a NBS report.

Agricultural growth of 4.5% y/y in Q3 2014 compared with 3.4% in the year-earlier period. Our take is that the positive contribution from transformation in the sector was diluted by the prevailing insecurity in some growing areas.   

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