THE economy is expected to “rebound” in the third quarter, reflecting the boost to consumer spending from increased employment and benign inflation, the University of Asia and the Pacific (UA&P) and the First Metro Investment Corp. (FMIC) said.

The government releases third quarter gross domestic product (GDP) data Thursday.

In the October edition of their Market Call, UA&P and FMIC said GDP is expected to come in at 6% in the third quarter and a further rise in the fourth, “as domestic demand revs up further.” They maintained their 6-6.5% full-year GDP growth estimate.

The Market Call estimate is higher than JP Morgan’s Global Data Watch: Asia estimate of 5.6% growth for the last two quarters of the year, taking its full-year projection to 5.5% for 2019.

“We still expect national government spending to further accelerate in the remaining months of the year, as we see huge spending on infrastructure and capital outlays during the third and fourth quarters of 2019,” according to the JP Morgan report.

Socioeconomic Planning Secretary Ernesto M. Pernia has said that economic growth needs to be at 6.4% in the second half to hit the lower end of that government’s 6-7% target range for 2019.

UA&P and FMIC projected that investment and consumer demand will continue to rise driven by lower interest rates and “subdued” inflation, which they expect to settle at 0.9% in October.

“With inflation holding below the 2% BSP floor in H2, and huge employment gains (supported by 2nd lowest self-rated poverty rate of 42% in Q3 as estimated by SWS), consumer spending shall show even more robust growth,” it explained.

A Businessworld poll of 14 economists produced a median estimate of 0.8% inflation for October, pointing to a likely easing from the 0.9% level in September and the nine-year high of 6.7% in October 2018.

The economist consensus was within the 0.5-1.3% October estimate by the Bangko Sentral ng Pilipinas’ (BSP) Department of Economic Research.

The “huge average monthly jump to 9% in Q2 from 3.3% in Q1” seen in energy sales data also point to robust private investment and manufacturing growth in the second half for the year, UA&P and FMIC noted.

They also maintained that a 6% full-year GDP growth forecast is “attainable.”

Budget department data show the government spent about 17% more at P1.04 trillion in the third quarter from P886.2 billion a year earlier, a marked improvement from the 2.3% contraction in the second quarter and 0.8% in the first quarter. However, this increase was smaller than the 29.6% growth from a year earlier.

The economy’s 5.5% average growth in the first half was largely blamed on the delayed passage of the 2019 budget as well as the public works ban ahead of the midterm elections in May. — Beatrice M. Laforga