South Africa’s third quarter GDP slowed more than the market expected. This is according to the Nedbank Group Economic Unit.
Earlier today, Statistics SA released data showing that real GDP expanded by 0,2%, down from an upwardly revised 3,5% growth rate in the second quarter and slightly worse than the consensus market forecast of a 0,5% increase.
Over the quarter, the main drag came from declines in value added by manufacturing (-3,2%), ‘trade, catering and accommodation’ (-2,1%), ‘electricity, gas and water’ (-2,9%) and agriculture (-0,3%). In contrast, the largest positive contributions came from stronger growth in value added by mining (5,1%) and general government services (1,8%).
In the first three quarters of this year, GDP grew by only 0,4% compared with the same period a year ago.
The Nedbank Group Economic Unit says expenditure on GDP increased by a seasonally adjusted annualised 0,5%, down sharply from 3,7% in the second quarter. The main drag came from a weaker net exports position, which subtracted 7,5 percentage points, as exports fell by 26,4% while imports contracted at a slower rate of 4,9%.
The main boost to expenditure came from a R20 billion increase in inventories, followed by stronger growth in household consumption expenditure, which rose by 2,6%.
Gross fixed capital formation remained weak, falling for the fourth consecutive quarter, but the rate of contraction at least slowed to 1% from close to 7% in the second quarter.
The Nedbank Group Economic Unit says it expects the economy to fare only slightly better in the final quarter of this year, producing a GDP growth rate of around 0.4% in 2016 as a whole.
“The outlook for 2017 remains uncertain, with more positive contributions expected from agriculture, mining and manufacturing. However, consumer spending will remain constrained, but confidence should improve as inflation eases and interest rates begin to fall in the second half of next year. Expectations of stronger growth should also encourage some recovery in fixed investment off a very low base. In contrast, further restraint is expected from government given the need to restore fiscal discipline. On balance, the economy is likely to grow by just over 1% in 2017.”
Nedbank adds that some of the key concerns that the Reserve Bank’s Monetary Policy Committee (MPC) highlighted in November have since eased.
“Today’s GDP figures confirm that the economy remains weak but at least managed to grow, however modestly. South Africa also recently escaped damaging sovereign risk rating downgrades to junk status.
“Although these developments have reduced the chances of further monetary tightening in early 2017, the MPC is likely to remain cautious given the downside risks posed to the rand by a volatile domestic political landscape and changing global dynamics. Consequently, the probability of another 25 basis point hike in interest rates early next year cannot be completely ruled out. By the second half of 2017 interest rates should begin easing as inflation begins to fall.”