South Africa's GDP has decreased by 0.1% in the first quarter – January to March 2024 – after a 0.3% increase in the fourth quarter of 2023, according to data from Statistics SA.
“Five of the 10 manufacturing divisions reported negative growth rates in the first quarter. The motor vehicles, parts and accessories and other transport equipment division, and the basic iron and steel, non-ferrous metal products, metal products and machinery division made the largest negative contributions to the decrease in the first quarter. The mining and quarrying industry decreased by 2.3% in the first quarter, contributing -0.1 of a percentage point.
“Decreased economic activities were reported for platinum group metals (PGMs), coal, gold and manganese ore.
The construction industry decreased by 3.1% in the first quarter, contributing -0.1 of a percentage point. Decreases were reported for residential buildings and construction works,” said Statistician-General Risenga Maluleke.
The agriculture, forestry and fishing industry increased by 13.5% in the first quarter, contributing 0.3 of a percentage point.
This was primarily due to increased economic activities reported for horticulture products.
Maluleke said household final consumption expenditure decreased by 0.3% in the first quarter. The decreases were reported for durable goods, semi-durable goods and services.
Bureau for Economic Research (BER) chief economist Lisette IJssel de Schepper said beyond agriculture, marginal expansions were recorded in trade, personal services and finance.
“This was a worse outcome than expected. While we cautioned that a stagnation or contraction was possible, our (and the consensus) view was for a slight expansion,” said De Schepper.
She said there was little data for the second quarter available so far and at this stage it seemed as if the sentiment towards the new administration could play a big role in driving the expenditure-side categories of GDP in the second half of the year.
“The lack of load shedding during April and May should set up industrial production for a nice bounce in the second quarter. Indeed, the April Absa PMI and S&P Global South Africa PMI showed a welcome boost in activity during the month. Unfortunately, the Absa PMI slumped in May as respondents said demand fell back as clients adopted a ‘wait and see’ approach before the elections later in the month. It remains to be seen how widespread this experience was across the economy, and whether the on-hold-orders bounce back or remain depressed,” said De Schepper.
Investment analyst Casey Sprake of Anchor Capital Investment said the economy was not growing at an adequate rate to sustainably boost long-term employment prospects for South Africans.
“Looking ahead, we anticipate that the near-term prospects for growth will remain lacklustre. Aside from the many structural problems present in the South African economy, the impact of elevated interest rates is expected to strain household disposable incomes, thereby restricting growth in consumer spending.
“Moreover, uncertainty around the eventual national election outcome will further exacerbate investor uncertainty about key policy direction on the part of government authorities.
“This mediocre economic performance will likely continue in the second quarter, as early high-level economic indicators reveal election uncertainty has diminished demand across various sectors, including manufacturing and retail. Overall, we track in line with the SA Reserve Bank’s (SARB) GDP growth forecast for 2024 and 2025 at 1.2% and 1.3% year-on-year, respectively,” said Sprake.
Cape Times