South Africa ‘double dodges’ recession
The South African economy not only grew by 0.4% in Q2 2024, but revised data from Stats SA put the country’s first-quarter growth at 0.0%, showing flat—not negative—growth.
Stats SA initially reported a 0.1% contraction in Q1 2024, putting South Africa at risk of a technical recession—characterised by two consecutive quarters of negative growth.
However, with the updated numbers and Q2 showing marginal growth of 0.4%, a technical recession was off the table.
Stats SA said that the finance, manufacturing, trade, and electricity, gas, and water supply industries drove most of the economy’s momentum on the production (supply) side in the second quarter.
Household consumption, government consumption and a build-up in inventories contributed favourably to expenditure (demand) growth.
The finance, real estate, and business services industries had the most significant impact on the production side, adding 0.3% of a percentage point to gross domestic product (GDP) growth.
Manufacturing also turned positive in the first quarter after shrinking in Q1, rising by 1.1% in Q2.
Production was mainly driven by motor vehicles & transport equipment and food & beverages.
Strong economic activity in wholesale, retail, and tourist accommodation pushed the trade, catering, and accommodation industry to grow by 1.2%.
“The country experienced no load shedding in the second quarter, which helped the electricity, gas & water supply industry,” said Stats SA.
“It grew by 3.1%, driven by increased electricity generation and water distribution. If we ignore the topsy-turvy economic environment caused by the pandemic in 2020, the 3.1% growth rate represents the sharpest increase since the third quarter of 2008.”
The construction industry also grew after a year of decline, growing 0.5% in Q2. This was due to economic activity related to residential and non-residential buildings. Nevertheless, there was a slight slowdown in construction works.
Notably, three industries contracted during Q2 2024.
Transport, storage & communication were the worst negative contributors, declining by 2.2% and dragging GDP growth down by 0.2 of a percentage point.
“Strike action and a fall in the freight volumes contributed to the industry’s poor performance,” said Stats SA.
Agriculture, forestry & fishing also faced several headwinds, such as lower-than-expected rainfall in many parts of South Africa, which affected maise and soya bean production), heavy rain in KZN, which affected sugar cane production, and foot-and-mouth disease, impacting sheep and pork production,).
Mining also saw a second decline due to the decreased production of iron ore, coal, diamonds and gold.
On the expenditure side of the economy, rising consumer confidence led to 1.4% increase in consumption expenditure.
Consumers upped their spending across most product categories, with the miscellaneous goods & services product group being the largest positive contributor, driven primarily by increased spending on insurance.
Regarding trade, imports rose by 1.7% on the back of increased trade in vehicles and transport equipment (excluding large aircraft), vegetable products, mineral products, and textiles and textile articles.
In the second quarter, inventories increased by R9.6 billion.
“The supply of goods in the economy exceeded demand, prompting the trade, manufacturing, and finance industries to store newly produced goods,” said Stats SA.
However, gross fixed capital formation, which includes investments in infrastructure and other fixed assets, disappointed for the fourth straight quarter.
“The 1.4% decline in the second quarter was due to lower investments in computer software, biological assets, construction works, machinery & other equipment, and transport equipment.”
Exports were also lower due to weaker trade in vegetable products, mineral products, vehicles & transport equipment (excluding large aircraft), and base metals & articles of base metals.
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