Statistics South Africa (StatsSA) reported yesterday that the South African economy expanded by 3.3% q-o-q and 0.6% y-o-y during the second quarter of 2016. This was slightly better than economists had expected and warded off the fear of a technical recession – two consecutive quarters of negative q-o-q numbers – at a time when the economy is struggling to gain traction.
The South African economy was just 0.25% y-o-y larger during the first half of 2016. This comprised a 0.1% y-o-y contraction during the first quarter and a 0.6% y-o-y expansion during the April – June period. The positive y-o-y performance during Q2 was as a result of growth in manufacturing, construction, hospitality, transport, communication, finance, banking, real estate and government services outweighing a contraction in activity associated with agriculture, forestry & fisheries, mining, and public utilities.
The finance, real estate and business services sectors – collectively the largest industry, accounting for 20% of the country’s gross domestic product (GDP) – grew by 2.9% q-o-q and 2.2% y-o-y during the second quarter. According to research by the Bureau for Economic Research (BER), confidence amongst retail bankers, investment bankers and asset managers increased during Q2, while confidence amongst insurers held steady. Nonetheless, confidence within the industry is below the long-term average.
The South African Reserve Bank (SARB) said during July that it expects 0% growth in the South African economy during 2016 while the International Monetary Fund (IMF) commented during the same month that it projects a mere 0.1% growth for the calendar year. The outlook for the second half of this year is therefore far from optimistic, and avoiding a sovereign ratings downgrade in December is certainly not guaranteed.