The apparent surge in economic activity in the second quarter represents a rebound from a low first-quarter base, when the economy grew less than 1 percent.
Statistics SA said yesterday that gross domestic product (GDP) expanded by 3 percent in the April to June quarter, boosted by an 11.5 percent rise in manufacturing GDP. The figures are quarterly changes adjusted for inflation and seasonal factors and multiplied by four to show an annual trend.
Annabel Bishop, the chief economist at Investec, warned that the “statistical rebound obscures the fact that GDP growth is weak”. And she warned that rand weakness would not provide “a watertight guarantee of improved manufacturing performance in the future”.
Kevin Lings, the chief economist at Stanlib, said the improvement in manufacturing was largely due to an increase in the number of working days – in other words, fewer public holidays – as well as fewer disruptions due to maintenance and other factors.
Nomura International analyst Peter Attard Montalto cited strong export growth in the quarter.
However, if not for the rebound effect, manufacturing would have expanded only 2.6 percent and overall GDP growth would have been closer to 1 percent, according to Bishop. She forecast full-year overall growth of 2.3 percent at most “with a risk that it could come out lower”. She said the second-quarter improvement in the GDP number did not imply a hike in interest rates. Theoretically, with inflation above the ceiling of the Reserve Bank’s 3 percent to 6 percent target, a hike from a historic low of 5 percent could be on the cards.
The second-quarter GDP growth rate – the highest since the second quarter of last year – fell short of a consensus forecast of economists polled by Reuters, who had predicted overall growth of 3.3 percent due to the “bounce-back” factor.
Razia Khan, Standard Chartered’s head of Africa research, said the second-quarter figure was disappointing.
“There is evidence of momentum, however modest, across a range of sectors – finance, electricity, construction, retail trade, and transport. Ordinarily, this might be associated with recovery. However, South Africa still faces significant threats.” She said unresolved labour market issues could continue to weigh on mining.
Nedbank’s economic unit said: “Already the third quarter has seen industrial action in the motor vehicle, construction and gold mining industries, which will negatively impact third-quarter growth. Our forecast for full-year growth is 2 percent, down from the 2.5 percent recorded last year.”
Apart from manufacturing, other growth areas in the second quarter were electricity and water (up 5.3 percent), finance and real estate (3.5 percent) and trade (3.2 percent). Transport and construction were slightly positive, expanding 1.6 percent and 1.2 percent, respectively.
Mining GDP contracted 5.6 percent due to lower production of gold, other metal ores including platinum, and other mining and quarrying, including diamonds.
Agriculture shrank 3.7 percent. Johan Willemse, a professor of agricultural economics at the University of the Free State, said there was little agricultural activity from April to June, while fresh fruit exports had buoyed growth in the first quarter. He said Stats SA could not make seasonal adjustment for this factor.