- Annualized Q2 GDP figures published today by the Statistical Office in South Africa contracted at a slower rate than in Q1.
Details
The South African economy contracted by 3.0% q/q (seasonally adjusted, annualised – s.a.a) in the second quarter compared to 6.4% q/q registered in Q1. The outcome in the second quarter was in line with the consensus expectation; we had expected a somewhat larger contraction. On an annual basis the South African economy contracted 2.8% y/y, which was in line with the consensus expectations, but a larger contraction compared to the 1.3% y/y fall in Q1.
The detailed breakdown of the number shows that the main reason behind the milder contraction in Q2 compared to Q1 was the positive contribution of the mining sector of 5.5%, compared to the significant contraction of 32.8% registered in Q1. Furthermore, the manufacturing sector that shrunk 10.9% in Q2 represented an improvement compared to the 22.1% fall registered in Q1. On the other hand, the agricultural sector deteriorated significantly in Q2 falling by 17.1% - significantly worse than the 2.9% fall in Q1. As expected wholesale and retail sales contributed more negatively compared to Q1 falling 4.5% in Q2, down from a 2.5% fall in Q1 confirming the worsening of household consumption throughout Q2. Usual buffer to the growth in Q2 were construction, general government services and personal services.
Assessment & Outlook
Looking at today’s outcome, it seems that the worst is over and we hope for more improvement as seen in other EMEA countries. We do not expect any robust recovery this year and only moderate recovery next year. In our view the implication for the monetary policy is that monetary easing has reached its bottom and we expect the central bank to keep interest rates on hold. The new SARB’s governor Gill Marcus starting her term in November might pose a risk to our forecast.
