Peru: Economy decelerates in Q1 on weaker exports and investment
May 30, 2014
GDP expanded 4.8% over the same quarter of last year in Q1, which was down from the 6.9% increase observed in Q4. The reading marked the weakest expansion since Q1 2013, but was in line with market expectations. On a quarterly basis, GDP growth dropped from a seasonally-adjusted 1.7% in Q4 to just 0.1% in Q1.
Domestic demand was the main driver behind the expansion. Government spending expanded 9.5% annually in Q1, which more than doubled the 4.5% increase tallied in Q1. Private consumption expanded a healthy 5.1%, although this was down from the 6.0% expansion tallied in Q4. Total investment decelerated from a 6.5% expansion in Q4 to just 1.7% growth in Q1, which represented the weakest expansion since Q4 2009. Fixed investment, however, picked up slightly in Q1, having expanded 2.5% (Q4: +2.4% year-on-year).
On the external front, exports of goods and services rose a meager 0.3% over the same quarter last year in Q1 (Q4: +3.2% yoy). Weakening external demand for important export commodities such as copper is dragging on output. Meanwhile, imports fell 0.1% in Q1, which was up from the 0.3% contraction registered in Q4. Consequently, the external sector’s net contribution to overall economic growth decreased from 0.9 percentage points in Q4 to 0.1 percentage points in Q1.
Author: Carl Kelly, Economist