South Africa’s GDP is on the road to recovery

Recovery - []

The country’s gross domestic product (GDP) yesterday showed signs that the could be on a recovery path – expanding 2% in the third quarter better than the market expectation of 1.5%.

Data from Statistics South Africa (Stats SA) indicated growth for the second consecutive quarter following a short two-quarter recession with agriculture, mining and manufacturing leading the path at 1.9% quarter-on-quarter but sectors that cumulatively account for the bulk of GDP contracted, showing that the growth could not seen as broad-based recovery as yet.

The better than expected performance in the quarter showed that growth could be on the upside this year.

FNB senior economic analyst Jason Muscat said the data was beyond bullish.

“Growth for the three quarters of 2017 is averaging 1%, and given our expectations of a strong showing from retail in the fourth quarter, we are likely to upwardly revise our full-year growth forecast which currently stands at 0.7%,” Muscat said.

The National Treasury revised its GDP growth forecast down to 0.7% from 1.3% in October while the World Bank projected it at 0.6%.

Africa economist at Capital Economics John Ashbourne said the growth suggested that the country’s recovery could be gaining traction.

“The manufacturing sector, which makes up almost 8% of GDP, posted its best performance in five quarters. Growth in the sector was broad-based, with strong rises in the output of petroleum, metal products, and motor vehicles.” Ashbourne said.

On Friday, statistics showed that new car sales grew last month by 16.4% to 32821 units from the 28207 cars sold in November last year.

The agricultural, sector which recorded its biggest quarterly growth in 21 years, jumped 44.2% in the quarter under review, higher than a 38.7% increase in the second quarter. 

The sector makes up 2.5% of total GDP.  

Higher production of field crops and horticultural products lifted the sector while mining went up 6.6% in the quarter, with its contribution to GDP up R7bn to R83bn.  

Raymond Parsons, a professor at the North-West University School of Economics, said the GDP data demonstrated the continued basic resilience of the South African economy.

“On the basis of this growth trend, and even if SA’s economic performance in fourth quarter turns out to be weaker than expected, a better average growth forecast of 0.8% or 0.9% is now possible for 2017 as a whole.”

“This would be some improvement on previous consensus growth forecasts for 2017 of about 0.7%,” Parsons said. 

The biggest downside surprise in the quarter’s data was a 0.4% quarter on quarter contraction in the trade, catering and accommodation sector, for which economists had pencilled in an expansion.  

Stats SA further said the effects of the freeze in civil servant hiring in efforts to contain the growth in the civil service compensation budget saw the government sector contracting for the third consecutive quarter.

Kamilla Kaplan, an economist at Investec, said in the first three quarters of the year, growth averaged 1% year-on-year and is likely to record a similar outcome for the full year.

“South Africa’s growth prospects are mainly reliant on the recovery in agriculture output following the 2015/16 drought and an increase in mining output, with commodity prices having risen from decade lows reached in early 2016,” Kaplan said.