SA moves closer to recession

Long-held fears of South Africa slipping into a recession gained further traction this morning after Statistics South Africa (StatsSA) confirmed a 1.2% contraction in the country’s gross domestic product (GDP) in the first quarter of the year.

The primary sectoral contributor to the contraction was the beleagured mining and quarrying industry, which contracted by an alarming 18.1% following lowered production of platinum group metals and iron ore.

Further contributing to the economic downtick, the transport, storage and communication industry narrowed by 2.7%, largely as a result of a decline in passenger and freight land transportation.

The agriculture, forestry and fishing industry – which has been in decline for five consecutive quarters – and the electricity, gas and water sectors were further drivers of the country’s decline, narrowing by 6.5% and 2.8% respectively in the first three months of the year.

“The strongest performer in terms of value-added in the first quarter was finance, real estate and business services. This industry increased by 1.9%, mainly because of growth in finance and real estate services,” StatsSA reported.

Showing modest growth, South Africa’s critical manufacturing industry grew by 0.6% in the first quarter, buoyed chiefly by the wood and wood products industry, paper, publishing and printing; and basic iron and steel, non-ferrous metal products, metal products and machinery sectors.

Gains in these two divisions were largely offset by negative growth in the food and beverages division.

Meanwhile, household final consumption expenditure decreased by 1.3% in the first quarter, reflecting increased pressure on consumers, with the main source of the decline spending on transport.

Conversely, government final consumption expenditure increased by 1%, while gross fixed capital formation decreased by 6%.

In terms of trade, a positive change in inventories was observed in the first quarter, which contributed 1 percentage point, while net exports made a modest positive contribution to total expenditure growth.

“Exports decreased by 7.1%, mainly because of lower mineral products, precious metals and transport equipment. Imports also decreased by 7.1%, mainly because of lower mineral and chemical products and imports of services,” said StatsSA.