SA economy still in ICU, but getting better?

August data confirms the Bureau for Economic Research’s (BER) view that quarterly GDP (Gross Domestic Product) is set for a sizeable rebound in the third quarter, but the bureau warns about the fourth quarter, for which it only “pencilled in” annualised growth of 1%.

According to the BER Weekly report, data from Stats SA for August shows that all sectors, except wholesale trade, performed better in August relative to July, although momentum is slowing. Some sectors are expected to expand by more than 200% on a quarterly, seasonally adjusted and annualised basis.

Stats SA’s figures indicated that mining production fell by 3.3% year-on-year in August, following a downward revised slump of 6.5% in July, the sixth consecutive month of a yearly decline, although at a slower pace. Gold contributed most to the decline, down by 14.8% and shaving off 1.9 percentage points, with the platinum group of metals rising by 12.7% and adding 2.6% percentage points.

Mining production rose by 6.8% on a monthly basis, decelerating after a 20.3% month-on-month leap in July. Mineral sales increased by 20.9% year-on-year as the platinum minerals group sales surged by 63% and iron ore by 39.3% on the back of higher prices.

The influence of the pandemic and lockdown could be seen in manufacturing production, which was down by 10.8% year-on-year in August, after a downwardly revised 10.2% decline in July. The transport sector was the largest contributor to the fall, down by 30.6% and shaving off 2.7% percentage points, along with basic iron and steel, non-ferrous metal products, metal products and machinery, down by 11.7% and shaving off 2.1% percentage points. Manufacturing production also rose by a slower-than-expected 3.6% month-on-month in August, after monthly increases of 21.3% in June and 5.9% in July.

The effect of the pandemic could also be seen in retail trade, which decreased by 4.2% year-on-year in August, after annual contractions of 7.2% in June and 8.6% in July, the fifth consecutive month of decreases in retail activity, although at the softest pace as lockdown restrictions were eased. Retail trade sales increased by 4% in August, following monthly changes of 0.6% in July and 5.1% in June, as sales of food, beverages and tobacco picked up. However, wholesale trade sales declined by 0.8% month-on-month in August and were still down by 3.8% year-on-year.

On the international front, the International Monetary Fund (IMF) adjusted the forecast for 2020 real global GDP to decline by 4.4%, which is better than the 5.2% contraction forecast in June. According to the BER, this revision mainly reflects the better than expected Q2 GDP data from advanced economies, as well as recent activity data which points to a strong rebound in the third quarter.

The IMF left South Africa’s real GDP forecast unchanged at -8% for 2020 and revised 2021’s expansion down to 3%, which is more or less in line with the BER’s latest projections.

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