Peru: GDP accelerates in Q2 on increased government spending; investment and exports fall again
May 22, 2015
GDP in Q2 expanded 3.0% over the same quarter of last year, which was above the 1.8% increase observed in Q1 and marked the strongest growth in five quarters. The Q2 result fell just short of market expectations of a 3.1% rise and reflects that despite a significant increase in government spending, ongoing declines in investment and export growth held back the economy.
Domestic demand grew 2.8% in Q2, which was below the 2.9% increase tallied in Q1. Private consumption expanded 3.3% in Q2 (Q1: +3.4% year-on-year). Government spending expanded 9.1% annually in Q2, which was even greater than the 5.8% increase tallied in Q1. Total investment contracted 1.0% in Q2, which contrasted the modest 0.4% increase in Q1. Total investment was dragged down by fixed investment, which fell 9.7% (Q1: -6.9% yoy).
On the external front, exports of goods and services in Q2 dropped 0.7% over the same quarter last year (Q1: -1.6% yoy). Weakening external demand for important export commodities such as copper continues to weigh on output. Meanwhile, imports fell 1.5% in Q2, which contrasted the 2.7% increase registered in Q1. Consequently, the external sector’s net contribution to overall economic growth deteriorated and swung from minus 1.2 percentage points in Q1 to plus 0.2 percentage points in Q2.
Sequential data show that GDP in Q2 grew 1.3% over the previous quarter, which was greater than the 1.0% increase observed in Q1.
Author: Carl Kelly, Economist