GDP growth ebbs in Q2

GDP reading: The economy lost steam in the second quarter, with GDP growth inching down to 0.3% on a seasonally adjusted quarter-on-quarter basis from an upwardly revised 0.4% rise in the first quarter. Q2’s reading matched the preliminary estimate and was in line with market expectations. On an annual basis, economic growth accelerated to 0.6% in Q2, compared to the previous quarter's upwardly revised 0.4% expansion and marking the best result since Q4 2022; Q2’s result came in above the preliminary estimate.

Drivers: The quarterly slowdown was due to private consumption growth decelerating to 0.2% seasonally adjusted quarter on quarter in Q2 from a 0.8% expansion in Q1. While total employment rose 0.5% in Q2 from the previous quarter, inflation increased, likely capping the improvement. More positively, public spending growth sped up to 1.5% in the second quarter, up from the first quarter's 0.9%. Similarly, fixed investment growth accelerated to 1.9% in the second quarter (Q1: -1.2% s.a. qoq); both results marked over two-year highs. On the external front, exports of goods and services growth improved to 0.6% in Q2 (Q1: +0.1% s.a. qoq). Meanwhile, imports of goods and services growth ticked up to 0.7% in Q2 (Q1: +0.4% s.a. qoq), marking the highest reading since Q4 2022.

GDP outlook: Our panelists have penciled in a stronger quarter-on-quarter GDP expansion for Q3 and a further acceleration for Q4. A continued recovery in purchasing power as wage growth outpaces inflation will lead to private consumption’s rebound this year.

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