In search of sectoral trends
From the national accounts for Q2 2017 we highlight the five best performing sectors. We cover only those sectors accounting for at least 1% of GDP at constant basic prices, and exclude other services. The data show agriculture expanding by 3.0% y/y and industry by 1.5% while services contracted by -0.9%. Industry returned to positive growth because of crude petroleum and natural gas, which expanded by 1.6% y/y after six quarters’ contraction. The performance of agriculture was the weakest for more than two years, and a disappointment in view of the reforms.
· There are no steady performers in the non-oil economy (other than agriculture), indicating that there is no momentum for a strong recovery. Transportation and storage, the strongest performer y/y in Q1, contracted. Its place has been taken by financial and insurance, which posted very modest growth in Q1. The information and communications sector contracted. We cannot therefore identify sectors set to deliver a recovery.
· We talk of a tentative recovery because trade, the second largest sector of the economy, again contracted, as it has every quarter since Q1 2016. It is the most reliable measure of demand across all income levels.
· Manufacturing was boosted by the 2.7% y/y growth of its largest segment (food, beverages and tobacco). The segment has benefited more than most from the greater availability of fx under the CBN’s multiple currency practices. We do not see any dramatic improvement in demand: rather, the sector has been able to restore output with its access to more, and more competitively priced imported inputs.
· For the challenge to explain public administration’s first growth for more than two years, we suspect that the headcount has been stable and productivity has marginally improved.