Two steps forward, one step backwards for economy

South Africa avoided slipping into a technical recession for the second time in a year according to the gross domestic product (GDP) numbers for the second quarter of 2019 released by Stats SA yesterday, thanks mainly to no load shedding by Eskom.

The economy managed to claw back 3.1% of the 3.2% it had lost in the first quarter of this year in what economists have called a “bounce back”.

This leaves South Africa back where it started the year, but six months behind.

“This is not a recovery, this is a bounce back from a very, very bad first quarter,” said Economists.co.za founder Mike Schussler.

“It’s still good news, but it’s not long-term good news yet and if it was really a recovery, we would have seen construction and employment grow, which we didn’t see.”

Expenditure on real GDP increased by 3% on the back of a 3.4% decrease, while the finance, real estate and business services industry increased by 4,1%.

The trade, catering and accommodation industry increased by 3.9% and general government services increased by 3.4%.

According to Statistician-General Risenga Maluleke, the construction industry remained firmly in recession, contracting for the fourth quarter in a row.

At home, consumption expenditure increased by 2.8% in the second quarter, thanks to an increase in spending on food and nonalcoholic beverages, as well as recreation and culture.

However, people kept hold of their purse strings, with spending on restaurants and hotels dropping 3.8%.

Momentum had to start somewhere, Schussler said, even if the bounce back was short-lived.

“I’m not saying we’re going into a recession, but we’re not going to have as good a growth in the approaching third quarter,” said Schussler.

Noting April had been an exceptional month, Schussler put it down to Eskom being able to keep the lights on, unlike the first quarter, which made for dismal results.

– amandaw@citizen.co.za

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