Surprise in the third quarter | Cebu Daily News

I was wrong about how the economy would fare in the third quarter (Q3) this year. And like almost everyone, I’m glad I was. Most were surprised by the unexpected strong recovery in the country’s gross domestic product (GDP). Compared to the third quarter of last year (i.e. year-on-year), GDP grew by 7.1%. More importantly, it increased 3.8% quarter-on-quarter, which means, compared to the previous quarter (Q2), with an appropriate statistical adjustment to remove seasonal effects on production.

Without such an adjustment, production in the third quarter of any year could be biased downward, as activity levels could be hampered by less favorable weather conditions during the rainy season, for example. The seasonally adjusted GDP figure, which is actually also routinely reported by the Philippine Statistics Authority (PSA), would offset this with an upward adjustment to correct for this particular seasonal bias. There may be other recurring seasonal biases due to other factors, for which statisticians have tools to extract the data. Thus, “seasonally adjusted” quarterly figures can be directly compared from quarter to quarter to reveal “pure” growth (or contraction) in the economy, in more real time than the rate could show. year-over-year growth. As I have already explained before (“We are not out of the recession”, 08/17/21), the latter can be particularly misleading when there are abnormal and drastic drops or increases in GDP, such as what happened last year due to the severe lockdowns imposed. in response to the COVID-19 pandemic. With an unusually low (or high) base to compare with the previous year, the year-over-year growth rate may appear unduly high (or low) due to the “base effect”.

That’s why I described it as misplaced jubilation when the news of seemingly impressive second quarter growth of 11.8% in mid-August was generally greeted with a festive mood. Even as the news broke the recession was over (because it was the first positive GDP growth rate we’ve seen since 2019), I pointed out that the economy had actually contracted by this time. there, with the growth rate adjusted for seasonal variations from quarter to quarter. negative at -1.4 percent (as revised).

Because the year-on-year GDP growth rate in Q3-2021 was 7.1%, several reports I’ve seen incorrectly described it as “weaker” than Q2. In reality, the reverse was true, as the economy experienced positive growth of 3.8% from the level in the second quarter. And therein lies the surprise that hardly anyone expected. The third quarter actually saw a return to stricter Community Quarantine (ECQ) for key COVID-19 hotspots, including Metro Manila and surrounding areas, after previously being in General Community Quarantine (GCQ ) more flexible in June. So I fully expected in August that the third quarter seasonally adjusted GDP level would drop even more from the second quarter level. The resurgence of unemployment to 8.1% in August and 8.9% in September, from 7.7% in May and June, also suggested a more contained economy in the third quarter, further reinforcing my expectation of a contraction.

But lo and behold, seasonally adjusted GDP actually reversed the decline from the previous quarter and grew 3.8% quarter-on-quarter, even though the 7.1% year-on-year growth made it look weaker than the 12-month period. % of second trimester (as revised).

So what led to the surprise? The PSA cited wholesale and retail trade, transportation and warehousing, and professional and business services as the main drivers of quarter-over-quarter growth. Wholesale and retail trade, manufacturing and construction drove year-over-year growth. It should also be noted that agriculture fell 1.0 percent in the first three quarters just because African swine fever caused animal production to fall by 19.7 percent. Without livestock farming, agriculture actually increased by 2.2 percent. All in all, I would attribute the surprise to how the ECQ as applied in 2021 is very different from the ECQ around 2020. As a result, the tightening of quarantine levels in the third quarter did not materialize. ultimately not translated into a tightening of the economy.

With restrictions having been eased further since then, the economic outlook looks even brighter, as long as we can prevent the virus from surprising us again.

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