Johannesburg - South Africa had avoided a technical recession, but sporadic output growth was not enough to shake off economic stagnation, the BankservAfrica Economic Transaction index (Beti) showed yesterday.
The Beti showed that the economy recovered a little last month, but not enough to stop the economic decline, BankservAfrica’s corporate reputation head, Michael Rubenstein, said.
A technical recession is defined as two consecutive quarters of declining gross domestic product (GDP).
Last month, the Beti dropped 0.5 percent compared with a year earlier, and was lower than in May, despite stronger quarter-on-quarter growth of 1.4 percent.
“The fact that the strike in the platinum sector ended probably had very little influence on the Beti in June,” Rubenstein said.
“So we believe that the stronger quarterly improvement must have come from sectors outside of manufacturing and mining.”
Mike Schüssler, the chief economist at Economists.co.za, found the timing of growth strange. “The reason for the uptick may be that people who have held back on buying things or increasing inventories may just have been unable to delay purchases any longer,” Schüssler said.
The other trend the Beti appeared to show was the month’s weakest data followed the end of large industrial action.
With further strike action under way, it was likely the weakest Beti growth numbers could still lie ahead, Schüssler said. This was because actual working days lost in the first half of the year, due to industrial action, were estimated to be around 9 million.
“The current growth is not fast and it is also not certain. Therefore, the best we can say is that a technical recession was avoided.”
Rubenstein said while transactions were “strongly” up 9.7 percent in nominal terms before adjusting for inflation, in real terms they were lower than a year ago, having fallen by 7.5 percent.
The Beti indicated that second-quarter growth would be between 1 percent and 1.5 percent, which meant GDP growth for the year, up to the second quarter, was going to be around 1.3 percent.
Schüssler said for the economy to bounce back, South Africa needed proper electricity supply to boost production at manufacturing levels. Lastly, Schüssler said it was time the government implemented its economic policy, the National Development Plan.
Annabel Bishop, the chief economist at Investec, said she would not refer to the economic situation as stagnant. Her thoughts were backed up by economic indicators such as the consumer price inflation rate, which she said likely peaked in the second quarter and should ease in the second half.