Secondary sector again most under pressure

From the national accounts for Q2 2016 we today highlight the five worst performing sectors. We cover what the NBS terms activity sectors, and then only those accounting for at least 1% of GDP at constant basic prices. The data show agriculture expanding by 4.5% y/y, and industry and services contracting by -9.5% and -1.3% respectively. Agricultural growth, the highest since Q1 2015, was attributed in the commentary to sectoral reforms. The weak performance of industry was driven by crude petroleum and natural gas (-17.5% y/y), and construction (-6.3%).
Perhaps the best evidence of the weakness of the non-oil economy, which contracted by -0.4% y/y in Q2, is that trade, the second largest sector of the economy, was flat in the quarter y/y and declined by -2.6% q/q. Trade is the most reliable measure of demand across all income levels.

Manufacturing sector contraction slowed from -7.0% y/y to -3.4%. For the largest segment of the sector (food, beverages and tobacco), it slowed from -11.1% y/y to -5.5%. Its underperformance relative to most other segments may be traced to its high import requirement.

The data for the diverse services sector do not send any clear signals. Financial and insurance posted double-digit contraction y/y for the second successive quarter. Public administration (see below), transport and storage, and real  estate all shrank by more than -5.0% y/y. The performance of these sectors more than outweighed the modest growth y/y posted by education, information and communications, and professional and technical services.

Secondary sector again most under pressure

Some observers might be tempted to cheer that public administration contracted by -6.1% y/y, compared with -4.4% the previous quarter. However, the sector’s output includes the consumption of fixed capital as well as the remuneration of employees.

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