South Africa: The recession ends as GDP climbs by 2,2%
The South African economy grew by 2,2% quarter-on-quarter (seasonally adjusted and annualised) in the third quarter of 2018, bringing to an end the country’s second recession since 1994.
Higher contributions to growth in a number of industries – most notably in manufacturing, transport as well as finance and business services – were enough to lift economic growth back into positive territory.
The rise in economic activity in the third quarter follows two consecutive quarters of negative growth, which is a widely recognised indicator of recession. The economy slumped by 2,6% in the first quarter of 2018 and a further 0,4% in the second quarter.
Manufacturing was the main driver of positive growth in the third quarter. The industry grew by 7,5%, largely as a result of increased production of basic iron and steel, metal products and machinery; wood and paper; petroleum products; and motor vehicles. This is the largest jump in manufacturing production since the second quarter of 2016.
After contracting in the second quarter, the transport, storage and communication industry rebounded by 5,7% in the third quarter, making it the second largest contributor to overall growth. An increase in freight transportation underpinned the rise in activity. This is the largest quarter-on-quarter increase for transport, storage and communication since the third quarter of 2007.
The finance, real estate and business services industry was another strong supporter of GDP growth, edging up by 2,3%. It was specifically the activities related to financial intermediation, insurance and real estate which performed better in the third quarter, contributing to the rise.
The agriculture industry bounced back from two consecutive quarters of negative growth to record a 6,5% rise in the third quarter. Strong growth in the production of field crops, horticultural cultivation and animal products contributed to the rebound.
The mining industry was the biggest detractor from economic growth, declining by 8,8%. Lower production levels were recorded for platinum group metals, iron ore, gold, copper and nickel.
Key facts from the third quarter 2018 GDP release:
Expenditure on GDP increased by 2,3% in the third quarter of 2018.
Gross fixed capital formation fell by 5,1% in the third quarter, largely as a result of declining investment in construction works, transport equipment, and non-residential buildings.
Households spent more on food, beverages and household furnishings in the third quarter, driving up household final consumption expenditure by 1,6%.
Unadjusted real GDP (measured by production) was up by 0,8% in the first nine months of 2018, compared with the first nine months of 2017.
Expenditure on GDP
Expenditure on real gross domestic product grew by 2,3% in the third quarter of 2018.
Household final consumption expenditure increased by 1,6% in the third quarter, contributing 1,0 percentage point to total growth. The main contributors to growth in HFCE were expenditures on food and non-alcoholic beverages (5,3% and contributing 1,0 percentage point), furnishings, household equipment and maintenance (6,6% and contributing 0,5 of a percentage point), clothing (5,0% and contributing 0,3 of a percentage point) and alcoholic beverages and tobacco (7,3% and contributing 0,3 of a percentage point).
Final consumption expenditure by general government increased by 2,2%. Increases in spending on goods and services and compensation of employees were reported in the third quarter.
Gross fixed capital formation decreased by 5,1%. The main contributors to the decline were activities associated with construction works, transport equipment, non-residential buildings and transfer costs.
There was a R12,7 billion buildup of inventories in the third quarter of 2018. Large increases were reported in manufacturing and trade.
Net exports contributed negatively to growth in expenditure on GDP. Exports of goods and services were up 24,2%, largely influenced by increasing trade in vehicles and transport equipment, base metals, vegetable products and precious metals.
Imports of goods and services increased by 26,7%, driven largely by an increase in imports of machinery and electrical equipment, vehicles and transport equipment, chemical products and mineral products.