GDP growth records best result in one-and-a-half years in Q2

GDP reading: GDP growth picked up to 1.1% on a seasonally adjusted quarter-on-quarter basis in the second quarter from 0.8% in the first quarter, marking the best result since Q4 2022. On an annual basis, economic growth edged up to 2.3% in Q2, following the previous period's 2.1% expansion and marking the strongest increase since Q2 2023.

Drivers: The quarterly improvement was driven by stronger momentum in both private and public spending as well as exports. Private consumption growth picked up to 0.6% seasonally adjusted quarter-on-quarter in Q2 from a 0.2% expansion in Q1, aided by a tighter labor market and softer price pressures. Government spending rebounded, growing 0.7% in Q2 (Q1: -3.4% s.a. qoq). Nonetheless, fixed investment growth plummeted to 0.8% in Q2 from 7.2% in the prior quarter. On the external front, exports of goods and services bounced back, growing 2.5% seasonally adjusted quarter on quarter in the second quarter (Q1: -1.0% s.a. qoq), which marked the best reading since Q1 2023. That said, imports of goods and services rebounded, growing 6.1% in Q2 (Q1: -0.5% s.a. qoq), marking the strongest reading since Q3 2021.

GDP outlook: Our Consensus is for the economy to lose some steam in H2, a prediction supported by softer economic sentiment in July–September, and a lower manufacturing PMI in July–August compared to Q2.

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