26 August 2014
South Africa’s economy grew at 0.6% in the second quarter, following a -0.6% contraction in gross domestic product (GDP) growth in the first quarter, Statistics South Africa reported on Tuesday.
The modest growth means the country has avoided entering a technical recession.
The Reserve Bank, in its June Monetary Policy Review, said that while the domestic economy had suffered several adverse supply shocks, particularly from strike action as well as electricity shortages, leading to negative first quarter growth, it was unlikely that the country would fall into a recession.
“Real GDP expanded by a seasonally adjusted annualised 0.6% quarter-on-quarter,” Nedbank economists noted. “Although better than the contraction of 0.6% recorded in the first quarter, it is still slower than the 0.9% quarter-on-quarter expected on average by the markets and our own forecast of a 1.4% improvement.”
According to Nedbank, the outlook for the economy remains murky.
“Recent economic indicators suggest that the weakness continued into the third quarter, with the [metalworkers’] strike disrupting manufacturing output throughout July.
“Consumers are generally expected to remain cautious, given pressure on household income, rising debt service costs and a deteriorating job market,” Nedbank said. “However, the mining and manufacturing sectors should fare better off a low base, supported by some improvement in global demand.
“Although South Africa avoided recession, underlying conditions remains generally weak and confidence is still very fragile. The risk to the growth outlook therefore remains firmly on the downside.”
Briefing reporters in Pretoria on Tuesday, Gerhardt Bouwer, executive manager for national accounts at Statistics SA, said the largest contributors to the quarter-on-quarter GDP increase of 0.6% were general government services and the transport, storage and communication industry, which each contributed 0.4 of a percentage point.
They were followed by finance, real estate and business services, which contributed 0.3 of a percentage point to growth.
Mining and quarrying (-0.4) and manufacturing (-0.3) were among the industries that contributed negatively to GPD growth.
“Most people’s eyes were on the platinum [sector], but I think this negative growth was more an overall poor performance of the mining industry,” Bouwer said. “It was not only platinum. There was poor performance in the gold and other mining activities. There are a lot of reasons for that [like] safety stoppages, strikes, etc.”
Nominal GDP was estimated at R891-billion in the second quarter, an increase of R17-billion over the first quarter.