Pretoria – South Africa’s Gross Domestic Product (GDP) at market prices increased by 0.6% in the second quarter of 2014, Statistics South Africa, said on Tuesday.
This means that the South African economy has avoided a recession following on a -0.6% decrease in the first quarter of 2014.
Briefing reporters, Executive Manager for National Accounts at Stats SA, Gerhardt Bouwer, said that the largest contributors to the quarter on quarter increase of 0.6% was general government services and the transport, storage and communication industry which each contributed 0.4% of a percentage point.
The finance, real estate and business services contributed 0.3% of a percentage point to growth.
According to the data, the growth in the finance, real estate and business services was due to increases in banking activities.
Mining and quarrying and the manufacturing industry were among the industries that contributed negatively to GPD (having contributed -0.4% percentage point and -0.3% percentage point).
Economic activity in the manufacturing industry reflected negative growth due to lower production in food, beverages and tobacco and petroleum among others,” noted the report by Stats SA.
This as the mining industry recently saw the end of a five month strike in the platinum sector.
“Most people’s eyes were on the platinum [sector] but I think this negative growth was more an overall poor performance of the mining industry. It was not only platinum. There was poor performance in the gold and other mining activities. There are a lot of reasons for that [like] safety stoppages, strikes etc.,” explained Bouwer.
In the second quarter of 2014, nominal GDP was estimated at R891 billion which is R17 billion more than in the first quarter. The agriculture, forestry and fishing expanded by R19 billion to R34 billion while general government services expanded by R6 billion to R140 billion.
According to data electricity, gas and water expanded by R5 billion to R27 billion, while manufacturing and mining and quarrying both contracted R1 billion to R90 billion and R66 billion.
In the second quarter the largest industries were the finance, real estate and business services at 21.2% followed by general government services at 17.2%, while the wholesale, retail and motor trade, catering and accommodation industry accounted for 16.1% and themanufacturing industry was at 11.1%.
The data means that the South African economy has avoided a recession following first quarter GDP data that showed a seasonally adjusted GDP at market prices slumped at an annualised rate of 0.6% for the first quarter of 2014.
The Reserve Bank in its June Monetary Policy Review (MPR) said that while the domestic economy has suffered several adverse supply shocks particularly from strike action as well as electricity shortages which led to negative first quarter growth, it was unlikely that the country would fall into a recession.
This decrease in growth — the worst since the second quarter of 2009 when the world’s economy dipped as a result of the global recession — comes after the GDP grew by an annualised rate of 3.8% in the fourth quarter of 2013.
Analysts had expected the economy to show moderate growth in the second quarter.
“Real GDP expanded by a seasonally adjusted annualised 0.6% quarter-on-quarter. Although better than the contraction of 0.6% recorded in the first quarter, it is still slower than the 0.9% quarter-on-quarter expected on average by the markets and our own forecast of a 1.4% improvement,” noted Nedbank economists.
According to the economists the outlook for the economy remains murky.
“Recent economic indicators suggest that the weakness continued into the third quarter, with the NAAMSA strike disrupting manufacturing output throughout July. Consumers are generally expected to remain cautious given pressure on household income, rising debt service costs and a deteriorating job market. However, the mining and manufacturing sectors should fare better off a low base, supported by some improvement in global demand.
“Although South Africa avoided recession, underlying conditions remains generally weak and confidence is still very fragile. The risk to the growth outlook therefore remains firmly on the downside,” said Nedbank.
Earlier today, Standard Bank said it expected GDP to expand by 0.6% which was weaker than market expectation of a year-on-year growth of 1.2% and a quarter-on-quarter growth of 0.9%.