South Africa’s second quarter economic growth beats expectations

Andrew Cummings
September 6, 2019

Expenditure on real gross domestic product rose by 3,0% in the second quarter of 2019. The mining industry grew by 14.4% quarter-on-quarter, contributing one percentage point to GDP growth.

"Increased production was reported for mining of iron ore, manganese ore, coal and other metal ores including platinum", Risenga said.

Finance, real estate and business services saw an increase of 4.1 percent. Increased economic activity was reported for financial intermediation, real estate activities and business services.

Economic growth may be undermined by a deterioration in public finances, which poses a risk to the country's investment-grade credit rating, Lara Hodes, an economist at Investec said in a note before the data release.

However, the agriculture, forestry and fishing sector as well as the construction industry decreased 4,2% and 1,6% respectively, and each contributed -0,1 of a percentage point to GDP growth. "We expect growth to slow to around 1.5% in the second quarter and going into 2020, but exogenous shocks may knock down this number", said Bloomberg economist Mark Bohlund.

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".

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General government services increased by 3.4%, mainly attributed to an increase in employment.

"Services should benefit from moderate growth in consumer spending, propped up by subdued inflation and slightly lower interest rates, but also kept in check by high unemployment, weak income growth and fragile confidence levels". The main contributors to the increase were machinery and equipment, transport equipment and residential buildings.

There was a R26 billion build-up of inventories in the second quarter of 2019. It includes government spending, household spending, investment spending (gross fixed capital formation and changes in inventories), and net exports. The Ministry noted, however, that a holistic look needed to be taken at the mining industry, beyond the minerals that have been dominant over a long time and which were now declining.

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