SA GDP grew more than expected in second quarter

South Africa’s gross domestic product (GDP) grew more than expected in the second quarter thanks to agriculture, finance and manufacturing expanding by 0.6%.

The first quarter had registered a 0.4% increase.

According to Statistics SA, six industries on the supply side of the economy grew in the second quarter, while the country benefitted on the demand side from a sharp increase in investments in machinery and equipment. More investment was made into products related to renewable energy.

In addition, despite a decline in overall household consumption, more spending was seen in the restaurants and hotels sector.

The six industries that recorded an increase in economic activity in the second quarter are agriculture, forestry and fishing that increased by 4.2%, manufacturing that grew by 2.2%, mining and quarrying that increased by 1.3%, personal services (0.7%), finance, real estate and business services (0.7%) and general government services (0.6%).

On the other hand, construction declined by 0.4%, trade, catering and accommodation by 0.4%, electricity, gas and water by 0.8% and transport storage and communication by 1.9%.

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Industries with increased activity in second quarter, adding to GDP

Manufacturing production expanded by 2.2%, driven mainly by petroleum, chemical products, rubber, and plastic products.

Metals, metal products, machinery, and equipment manufacturers also had a good quarter, partly due to increased demand for crude steel.

Investment in South Africa’s automotive sector boosted transport equipment and motor vehicle production.

The finance industry grew by 0.7%, thanks to financial intermediation, insurance, and real estate services.

Agriculture rebounded with a 4.2% increase in output, driven by higher production of field crops and horticulture products, supported by favourable weather, increased cultivation, and export demand.

Mining continued its growth streak with help from platinum group metals, gold, ‘other metallic minerals,’ and coal.

The personal services industry saw growth, particularly in education and health, while the increase in general government services was primarily due to a rise in staff numbers.

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Industries that experienced decreased activity

Not all industries had a good second quarter. The transport, storage and communication industry decreased by 1.9% after 18 months of consecutive growth. Transport support services were lacklustre and the data showed decreases in land freight and road passenger transport.

The trade industry faced challenges with weaker retail and wholesale figures, but it found some relief from increased activity in the motor trade, tourist accommodation, and the restaurant, catering, and fast-food sectors.

The construction industry, after maintaining stability for 18 months, lost momentum due to declining economic activity in non-residential and residential building projects.

Although there was a slight increase in construction work, it was not sufficient to push the industry into positive territory.

On the demand side, gross fixed capital formation saw a 3.9% increase, mainly driven by investments in imported machinery and equipment, particularly for electricity infrastructure.

This was complemented by rising sales of locally produced electric motors, generators, and special-purpose machinery.

This growth was further supported by a 3.3% rise in imports, which included items related to renewable energy, batteries, vegetable products, artificial resins and plastics, base metals, and articles of base metals, as well as animal and vegetable fats and oils.

South African exports experienced a 0.9% increase, primarily attributed to higher trade in chemical products, prepared foodstuffs, beverages and tobacco, vehicles and transport equipment, mineral products, and machinery and electrical equipment.

Household consumption down

As was indicated in various surveys and studies, household consumption decreased in the second quarter as consumers cut back on a variety of goods and services.

However, despite the overall decline, there was more spending on restaurants and hotels, increasing by 4.1%, the seventh consecutive quarter of growth for this category.

Households also spent more on transport (1%), education (0.3%) and health (0.2%), but less on communication (0.3%), housing, water, electricity, gas and other fuels (0.5%), alcohol, tobacco and narcotics (0.8%), miscellaneous goods and services (0.9%), recreation and culture (0.9%), clothing and footwear (1%), food and non-alcoholic beverages (1.2%) and furnishings, household equipment and maintenance (2.1%).