Peru: GDP growth slows in Q2 as domestic demand weakens
August 22, 2016
After a positive start to the year, Peru’s economy lost some steam in the second quarter as domestic demand slowed down in comparison to the previous quarter. GDP expanded 3.7% in Q2 over the same quarter last year (Q1: +4.5% year-on-year), matching market expectations. In the first half of the year, Peru’s economy grew 4.1%, which was broadly in line with the 4.0% expansion in H2 2015.
On the domestic side of the economy, demand moderated substantially on the back of a deceleration in government consumption and a further contraction in total investment. Private consumption expanded 3.5% in Q2, which was a notch lower than Q1’s 3.6% increase. The result was broadly in line with the average rate at which private consumption has been expanding since Q2 2014. Government consumption grew 2.7%, which was a strong decline from Q1’s 11.4% increase. Government consumption had not shown such a slow growth rate since Q1 2011. Meanwhile, total investment contracted 7.2%, which was only a mild deterioration from the 7.1% decrease in Q1 but still marked the largest year-on-year contraction in over six years and the fourth consecutive fall.
Exports of goods and services grew 7.8% in Q2, which came in below the record high 8.9% expansion in Q1. Meanwhile, imports fell further, from Q1’s 2.0% drop to a 5.3% contraction in Q2. As a result, the external sector’s net contribution to overall economic growth picked up from 2.7 percentage points in Q1 to 3.2 percentage points—the strongest contribution in over six years.
Sequential data showed that GDP in Q2 grew a seasonally-adjusted 0.8% over the previous quarter, which mirrored Q1’s reading.