The good news is that the SA economy has bounced back to avert a technical recession. The bad news is that it remains on track to deliver sub-par growth for the year as a whole.
Economic growth rebounded convincingly in the second quarter to 3.3% q/q seasonally adjusted and annualised, up from the shocking 1.2% contraction in the first quarter.
This was SA’s fastest quarterly growth rate since the final quarter of 2014. It also exceeded consensus expectations for growth of 2.6%-2.8%.
"This is, obviously, very good news," says Capital Economics’ John Ashbourne. However, he cautions that the strong quarter-two result mostly reflects a bounce-back following the disaster of the first quarter. This means that this pace is unlikely to be sustained.
Initial signs point to a renewed slowdown in growth in the third quarter, which is likely to be accentuated by the recent rise in political tension.
The big turnaround in second-quarter growth was driven by a resurgence in manufacturing and mining output.
Manufacturing grew by 8.1% q/q in the second quarter, from a dismal 0.6% q/q in the previous quarter, and contributed one percentage point to headline GDP growth.
The rebound in mining was even greater — from a contraction of 18.1% q/q in the first quarter to 11.8% q/q growth in the second quarter. It contributed 0.8% percentage points to headline growth thanks to increased production of platinum group metals.
The two sectors, which include agriculture and electricity, are both in recession, however. In fact, the former has contracted for six consecutive quarters, mainly because of the drought.
Nedbank’s economic unit warns that "the outlook remains murky". Patchy global demand, relatively low global commodity prices, rising domestic production costs and limited economic infrastructure are likely to continue to constrain production.
Growth in expenditure on GDP rebounded to 3.4% q/q in the second quarter driven by household and government consumption expenditure, which increased by 1% and 1.3% respectively.
Exports performed exceedingly well, growing by 18.1% over the quarter, while imports decreased by 5.1%.
This helped offset a 4.6% decline in gross fixed capital formation — its third straight quarter of contraction.