Weak GDP data dampens ‘Ramaphoria’ – and it might not get better soon

2018-06-05 17:17

South Africa’s gross domestic product (GDP) fell by 2.2% in the first four months of 2018.

This was the main announcement by Statistician-General Risenga Maluleke, who released the report in Pretoria on Tuesday.

GDP, which is measured by production and is one of the key measures of the country’s economic growth, declined mainly due to the manufacturing, mining and agricultural industry which all decreased significantly during the period.

The South African economy stumbled in the first quater of this year after experiencing a growth of 3.1% in the fourth quarter of 2017.

This is the largest quarter on quarter decline since 2009.

Capital Economics, an independent economic research company, said that this was worse than the consensus forecast by Bloomberg, which expected a contraction of 0.5% quarter on quarter.

“Today’s downbeat figure will dampen some of the enthusiasm surrounding President Cyril Ramaphosa, who succeeded the scandal-plagued Jacob Zuma.

"South Africans themselves were also optimistic; consumer confidence jumped to an all-time high in the first quarter. But this ‘Ramaphoria’ does not seem to have translated into stronger spending,” the research company said.

It did qualify this by saying that Ramaphosa was only sworn in on February 15, halfway through the first quarter, which means that even though there were some early successes in the new dispensation these positive contributions will take a while to fully come into effect.

The rand seemed to also be negatively affected by this contraction with the local currency more than a percent down to the US dollar, trading at R12.70 at 2.30pm.

The opening price on Tuesday morning was R12.55.

Stats SA said that mining fell 9.9%, manufacturing 6.4% and agriculture 24.7%.

The country’s head statistician said the largest contributors to the decrease were the the basic iron and steel, non-ferrous metal products, metal products and machinery division, as well as the petroleum, chemical products, rubber and plastic products divisions.

Imports also decreased by 6.5%, driven largely by a drop in imports of machinery and electrical equipment.

There was some increase with government services growing by 1.8%, while finance, real estate and business services grew by 1.1%.

Capital Economics said that despite all the good that Ramaphosa was doing, they doubt it will help tur-around the economy in the short-term and that even though they expect growth to pick up slightly, it will “remain weak by historical standards.”

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March 17 2019