GDP shock: Economic growth decreased in third quarter despite positive signs

South Africa’s GDP decreased in the third quarter despite positive signs of economic growth that led economists to expect the economy to grow by up to 0.5%.

South Africa’s gross domestic product (GDP) decreased by 0.3% in the third quarter of 2024, after increasing by 0.3% in the second quarter of the year. The drop is driven by the agriculture, forestry and fishing industry decreasing by 28.8%, primarily due to decreased economic activities reported for field crops.

Economists expected GDP to increase by between 0.2% and 0.5% and not one of them expected a decrease, although they did not expect the GDP figures to shoot the lights out.

According to Statistics SA, the transport, storage and communication industry decreased by 1.6%, while decreased economic activities were also reported for land transport and transport support services. The trade, catering and accommodation industry decreased by 0.4%, with decreased economic activities reported for wholesale trade, motor trade and food and beverages.

General government services also decreased by 0.1%, mainly due to decreased employment in national and provincial government and extra-budgetary institutions.

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GDP increases in some industries

Increases were noted in the finance, real estate and business services industry that increased by 1.3%, with increased economic activities reported for financial intermediation, insurance and pension funding, auxiliary activities, real estate activities and other business services.

The personal services industry increased by 0.5%, with increased economic activities reported for health and education. The manufacturing industry increased by 0.5%, with three of the 10 manufacturing divisions reporting positive growth rates.

The largest positive contribution was reported for the basic iron and steel, non-ferrous metal products, metal products and machinery division.

The mining and quarrying industry increased by 1.2%, with increased economic activities reported for manganese and chromium ore.

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Nominal GDP in the third quarter

Nominal GDP was estimated at R1 840 trillion in the third quarter according to Statistics SA, down by R7 billion compared to the second quarter. The biggest movers in the third quarter were finance that increased by R17 billion to R398 billion and trade that increased by R7 billion to R228 billion, while construction decreased by R4 billion to R39 billion and agriculture decreased by R52 billion to R34 billion.

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Expenditure on GDP decreased

Expenditure on real GDP decreased by 0.2% in the third quarter after increasing by 0.4% in the second quarter of 2024. Household final consumption expenditure (HFCE) increased by 0.5%, contributing 0.3 of a percentage point to the total negative growth.

Statistics SA says the highest growth rates were reported for non-durable and semidurable goods. The main positive contributors to the increase in HFCE were spending on food and non-alcoholic beverages (0.9%), housing, water, electricity, gas and other fuels (0.6%), recreation and culture (1.2%) and restaurants and hotels (1.1%).

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Government expenditure also down by 0.5%

General government’s final consumption expenditure decreased by 0.5%, mainly driven by decreases in buying goods and services and compensating employees.

Gross fixed capital formation increased by 0.3% with the main positive contributors other assets (4.4%), construction works (1.4%) and machinery and other equipment (0.5%).

There was a R6.6 billion drawdown of inventories (seasonally adjusted and annualised value). Large decreases in three industries, manufacturing; electricity, gas and water, and mining and quarrying, contributed to the inventory drawdown.

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Exports decreased by 3.7% and imports by 3.9% as GDP falls

Net exports contributed positively to expenditure on GDP. Exports of goods and services decreased by 3.7%, largely influenced by decreased trade in pearls, precious and semi-precious stones and precious metals, vehicles and transport equipment excluding large aircraft, chemical products, base metals and articles of base metals, and machinery and electrical equipment.

Imports of goods and services decreased by 3.9%, largely influenced by decreased trade in vehicles and transport equipment excluding large aircraft, mineral products, vegetable products, and base metals and articles of base metals.