JOHANNESBURG - THE RAND rallied to a near 10-month high yesterday after the economy rebounded way more than expected in the third quarter as the government began easing the Covid-19 lockdown restrictions.
The rand leapt nearly 1 percent to close in on the psychological R15 barrier against the dollar, dropping to R13.73 by 5pm as Statistics South Africa (StatsSA) said that the country’s gross domestic product (GDP) leapt an unprecedented 13.5 percent quarter-on-quarter from the very low base caused by the lockdown-induced collapse in the second quarter.
StatsSA said that the economy grew by an annualised rate of 66.1 percent in the third quarter from the second quarter’s -51.7 percent plunge after restrictions were eased to level 2 in mid-August.
Anchor Capital’s Nolan Wapenaar said it rose on the better-than-expected GDP print. Wapenaar said the continued good news on the Covid-19 vaccine front had increased the rotation of investors away from the dollar towards cyclical currencies.
“This coupled with the fact that Europe will probably recover faster as the US is still battling with the virus should see a continuation of the gradual weakness of the US dollar,” Wapenaar said.
“We think that the rand will test the R15.00 barrier as it looks to strengthen into the 14s.”
StatsSA said that manufacturing, trade and mining were the main drivers of growth.
The economy rebounded to 66.1 percent from a 51.7 percent crash in the second quarter, beating the market expectation of 34.6 percent quarter-on-quarter rise as the easing of the lockdown restrictions enabled a revival in mobility indicators.
The largest contributors included the manufacturing sector, which added 16.2 percent, trade at 14.6 percent and mining at 11.8 percent.
The economy, however, is still 6 percent smaller if this year’s third quarter is compared to the same period last year.
Investec’s chief economist Annabel Bishop said the partial recovery in the economy was mainly driven by the statistical base effect as GDP collapsed in the second quarter.
Bishop said that the GDP annualisation took the growth rate for one quarter and calculated what the outcome would be for the entire year if the growth rate was maintained in all four quarters.
She said the true outcome of GDP growth was the 13.5 percent quarter-on-quarter rise from the second quarter to the third quarter.
“A sectoral breakdown of the GDP outcome reveals that while all sectors experienced substantial quarter-on-quarter increases, results were very uneven, with the production side performance boosted by pent up demand following the shutdown in the second quarter,” Bishop said.
“For the full year’s growth we are looking at a contraction of between -7.5 percent to -8 percent year-on-year now.”
Encouragingly, expenditure on real GDP increased at an annualised rate of 67.6 percent in the quarter as household consumption, exports and gross fixed capital formation recovered.
Gross Fixed Capital Formation was lagging the recovery though, rising at a rate of 26.5 percent, which does not bode well for the future.
Momentum economist Sanisha Packirisamy said the sustainability of the recovery remained muted as consumer and business spending remain soft.
Packirisamy said they were expecting growth to contract by around 8 percent this year.
“We are pencilling in a shallow recovery of 2 percent in 2021, as an increase in the number of business closures, persistently higher levels of unemployment, fiscal stress and ongoing challenges to electricity supply detract from the expected upturn,” she said.
BUSINESS REPORT