Statistics South Africa (StatsSA) reported on December 3 that the South African economy contracted in the third quarter of 2019. Real gross domestic product (GDP) contracted by 0.6% q-o-q compared to a median growth forecast of 0.1% q-o-q amongst local economists. The latest q-o-q decline in GDP was the fourth negative number in the past two years – including the recession during the first half of 2018. High-frequency data warned that the third quarter GDP number would not be good and this raised red flags around the fiscal budget, job creation and sovereign ratings. A year after the first South Africa Investment Conference, the impact of this event appears muted.

While six out of ten industries contracted q-o-q in 2019Q3, the three largest negative contributors to GDP were mining, manufacturing, and the collective transport, storage and communication sectors. Real mining and quarrying activity contracted by 6.1% q-o-q, with Stats SA previously reporting that production fell 1.6% q-o-q and mineral sales increased by only 1.1% q-o-q in current prices. Factory activity was down 3.9% q-o-q; the Absa Purchasing Managers’ Index (PMI) was below the neutral 50 level during August and September due to weak domestic demand conditions and concerns about the health of the global economy. In turn, freight transport tonnage fell by 0.9% q-o-q in the third quarter due to lower trade volumes and weaker export demand. Positive contributions by trade, catering and accommodation; finance, real estate and business services; general government services and personal services could not overcome these negative trends.

 

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Issued by PwC