Cyprus GDP shows sharp slowdown in consumer spending

The Statistical Service published the full breakdown of national accounts on Monday, after its flash estimate a few weeks ago showed that the economy had slipped into recession.
The data confirmed that the economy had shrunk for two quarters on a row: according to our analysis GDP declined over the previous quarter, and on a seasonally adjusted basis, by 0.6% in the first quarter and 0.4% in the second (slightly better than the flash estimate, which had said 0.4%).
Compared with the same period of the previous year, GDP contracted by 0.7% in the second quarter, having inched up by 0.8% in the first.
On a sectoral basis, the biggest crunch has come from the consumer, with wholesale and retail trade down 5.4% over the same period of the previous year, no doubt as a response to rising unemployment and tighter credit conditions.
Faced with a weaker global economy, industry has also struggled, tumbling by 4.8% in the second quarter, having already dropped by 4.5% in the first.
Construction also finally succumbed to recession, dropping by 0.4% in the second quarter. In the same period a year ago, it was racing along at 5.2%.
Collapse in external trade
On an expenditure basis, there has clearly been a collapse in external trade. Not only did exports of goods and services fall by 12.1% over the same period of 2008 but imports of goods and services also fell by 17.3%. And this was after sharp falls in both the first quarter and the fourth quarter of 2008.
Faced with such a bleak environment, it is not surprising that investment (fixed capital formation) declined by 5.2% in the second quarter.
Inventories have also made a large negative contribution to growth as businesses run down stocks but do not order more.
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